DCIT, CHENNAI V. M/s. Vels Institute of Science & Advanced Studies, CHENNAI

ITA 2858/CHNY/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6399 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 24-05-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 03-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Assessee Lawyers: R SIVARAMAN
• Keywords: Capital asset; Gift; Charitable institution; Maximum Marginal Rate; Cost of acquisition; Fair market value; Competent authority; Capital receipt; Benefit of exemption; Commercial expediency; Capital expenditure
• Section: 80G; 12AA; 10B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , ! ' . #$ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER . / ITA NOS. 2857 & 2858/MDS/2016 / ASSESSMENT YEARS : 2012-13 & 2013-14 THE DEPUTY COMMISSIONER OF INCOME-TAX (EXEMPTIONS), CHENNAI CIRCLE, CHENNAI - 34. ( /APPELLANT) V. M/S. VELS INSTITUTE OF SCIENCE & ADVANCED STUDIES, NO.521/2, ANNA SALAI, NANDANAM, CHENNAI 600 035. PAN AAATV9804F RESPONDENT) / APPELLANT BY : SHRI N. MADHAVAN, JCIT / RESPONDENT BY : SHRI R. SIVARAMAN, ADVOCATE ! / DATE OF HEARING : 24.05.2017 '# ! / DATE OF PRONOUNCEMENT : 17.08.2017 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE APPEALS FILED BY THE REVENUE ARE DIRECTED A GAINST THE COMMON ORDER OF THE CIT(APPEALS) DATED 8.7.2016 FOR THE - - ITA 2857 & 2858/16 2 ASSESSMENT YEARS 2012-13 AND 2013-14. 2. THE GROUNDS RAISED BY THE REVENUE FOR THE ASSESS MENT YEAR 2012-13 IN ITA NO.2857/MDS/2016 ARE AS FOLLOWS : 2. THE LD. CIT(A) ERRED IN DIRECTING THE AO TO AL LOW EXEMPTION U/S.11 OF THE I.T.ACT AS THERE IS NO VIOLATION U/S. 13(1)(C) OF THE ACT. 2.1 THE LD. CIT(A) FAILED TO ADJUDICATE THE ISSUE REGARDING PURCHASE OF LAND MEASURING 4.49 CRORES OF LAND WORT H 4 CRORES AT ZAMIN PALLAVARAM FROM M/S. VGS (P) LTD. AT A COS T OF 13.57 CRORES. 3. THE LD. CIT(A) ERRED IN HOLDING THAT INTEREST H AS BEEN REMITTED AT 14% FOR THE ADVANCE OF 2 CRORES PAID TO VGS ESTATES FOR THE PROPERTY AT THALAMBUR AND THERE IS NO VIOLATION U/S.13(1)(C OF THE I.T. ACT. 3.1 THE LD. CIT(A) FAILED TO OBSERVE THAT THE ASSE SSEE HAS NOT MENTIONED THIS ADVANCE IN THE AUDIT REPORT IN FORM 10B DATED 22.8.2012 THOUGH THIS AMOUNT WAS OUTSTANDING. 3.2 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT IN THE LEDGER ACCOUNT PRODUCED BY VGS ESTATES, THE INTEREST AMOUN T WAS SHOWN ONLY AS INTEREST PAYABLE AND NO INTEREST R ECEIVABLE WAS REFLECTED IN ASSESSEES BOOKS. 4. THE LD. CIT(A) ERRED IN HOLDING THAT THE TRUST IS ELIGIBLE FOR EXEMPTION U/S.11 OF THE I.T. ACT AND THERE WAS NO V IOLATION U/S.13(1)(C) OF THE I.T. ACT IN RESPECT OF AMOUNT P AID TO MANAGING TRUSTEE FOR PURCHASE OF LAND AT MANJAKARAN AI. 4.1 THE LD. CIT(A) ERRED IN HOLDING THAT THE SAID PROPERTY ITSELF - - ITA 2857 & 2858/16 3 WAS TAKEN AS COLLATERAL SECURITY FOR THE TRUST AND HENCE CANNOT BE TREATED AS VIOLATION OF SECTION 13(1)(C) OF THE I.T. ACT. 4.2 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE LAND WAS NOT MORTGAGED WITH THE TRUST IN THE PURPORTED AGRE EMENT TO SALE ENTERED. 4.3 THE LD. CIT(A) FAILED TO OBSERVE THAT NO INTER EST ON THE AMOUNT HAS BEEN RECEIVED BY THE ASSESSEE DURING THE A.Y. 2012-13. 4.4 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FA CT THAT THE TRUST WAS VERY MUCH AWARE THAT THERE WAS A LONG PEN DING DISPUTE BEFORE THE SUPREME COURT REGARDING SETTING UP OF THE MEDICAL COLLEGE IN THE IMPUGNED LAND AT THE TIME OF ENTERING INTO AN AGREEMENT FOR SALE. 4.5 THE LD. CIT(A) FAILED TO APPRECIATE THE FACT T HAT EVEN AFTER CANCELLATION OF THE AGREEMENT FOR SALE, THE MANAGIN G TRUSTEE CONTINUED TO HOLD THE TRUST FUNDS AND DID NOT RETUR N THE ENTIRE ADVANCE ON THE DATE OF CANCELLATION OF THE AGREEMEN T. 4.6 THE DEPARTMENT HAS NOT ACCEPTED THE DECISION O F THE HONBLE ITAT IN ITA NO.1759/MDS/2013 DATED 28.10.20 15, WHICH WAS RELIED ON BY THE LD. CIT(A) 5. THE LD. CIT(A) ERRED IN HOLDING THAT ADVANCES M ADE BY THE TRUST TO THE CONCERNS IN WHICH THE TRUSTEES ARE INT ERESTED ARE NOT ATTRACTED BY THE PROVISIONS OF SEC.13(1)(D) R.W . SEC.11(5) OF THE I.T. ACT. 5.1 THE LD. CIT(A) FAILED TO APPRECIATE THAT THE I NTEREST AMOUNT SUBSEQUENTLY PURPORTED TO BE PAID TO THE ASSESSEE T RUST FORTIFIES THAT THE AMOUNT INVOLVED IS ONLY AN INVESTMENT. 6. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE TR UST INCURRED INTEREST EXPENDITURE TO THE EXTENT OF 2.02 CRORES ON THE TERM - - ITA 2857 & 2858/16 4 LOAN AVAILED FROM ICICI BANK, BUT THE TRUST HAD CHO SEN TO EXTEND INTEREST FREE ADVANCES TO THE INTERESTED PER SONS SPECIFIED IN SEC.13(3) OF THE ACT. 6.1 THE LD. CIT(A) ERRED IN HOLDING THAT THERE IS NO LOSS TO THE TRUST AS SUBSEQUENT TO THE ASSESSMENT PROCEEDINGS, THE LOSS OF INTEREST HAS BEEN COMPENSATED BY THE MANAGING TRUST EE. 6.2 THE LD. CIT(A) FAILED TO OBSERVE THAT SUCH INT EREST PAYMENT WAS NOT MANDATED IN ANY OF AGREEMENTS WITH THE INTE RESTED PERSONS. 6.3 THE LD. CIT(A) ERRED IN COMPUTING THE COMBINED NET BALANCE TO ARRIVE AT THE INTEREST RECEIVED BY THE TRUST FRO M THE MANAGING TRUSTEE WAS MORE THAN THE BALANCE STANDING AGAINST THE INDIVIDUAL ACCOUNTS AND THAT HENCE THERE WAS NO VIO LATION U/S.13(1)(C) OF THE I.T. ACT. 6.4 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT SUBSEQUENT PAYMENT OF INTEREST BY THE MANAGING TRUSTEE TO THE TRUST WOULD IN NO WAY HELP THE ASSESSEE SINCE IT WAS NOT MANDATED IN THE AGREEMENT. 7. THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESS EE WOULD BE ELIGIBLE FOR EXEMPTION U/S.11(1)(D) IN RESPECT OF T HE CORPUS DONATIONS RECEIVED IN KIND WHEN THE PROVISIONS OF S EC.13(1)(C) AND 13(1)(D) ARE VIOLATED. 8. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT FO R THE A.Y. 2011-12 IN ASSESSEES OWN CASE, THE LD. CIT(A) CONF IRMED THE ORDER OF THE AO IN SIMILAR ISSUES IN ITA NO.114/14- 15 DATED 9.3.2015 AND THE HONBLE ITAT IN ITA NO.1548/MDS/20 15 DATED 6.7.2016 HAS DISMISSED THE APPEAL FILED BY THE ASSE SSEE IN LIMINE. THUS THE ISSUES HAVE REACHED FINALITY. - - ITA 2857 & 2858/16 5 2.1 THE GROUNDS RAISED BY THE REVENUE FOR THE ASSES SMENT YEAR 2013-14 IN ITA NO.2858/MDS/2016 ARE AS FOLLOWS: 1. THE ORDER OF THE LEARNED CIT(A) S CONTRARY TO TH E LAW AND FACTS OF THE CASE. 2. THE ID CIT(A) ERRED IN HOLDING THAT THE TRUST IS ELIGIBLE FOR EXEMPTION U/S.L1 OF THE I.T. ACT AND THERE WAS NO VIOLATION U /S.13(L)(C) OF THE I.T.ACT IN RESPECT OF AMOUNT PAID TO MANAGING TRUST EE FOR PURCHASE OF LAND. 2.1 THE ID CIT(A) ERRED IN HOLDING THAT THE AO HAS NOT FOUND OUT THE GUIDELINE VALUE OF THE PROPERTY. 2.2 THE ID. CIT (A) OUGHT TO HAVE APPRECIATED THAT THE AO IN PARA NO.6.2 OF HIS ORDER CLEARLY SPELT OUT THAT THE PURC HASE COST OF RS.23,30,80,000/- IS ABOVE THE GUIDELINE VALUE. 2.3. THE ID. CIT (A) FAILED TO OBSERVE THAT THE ISS UE EXISTS FROM THE A.Y. 2010-11 ONWARDS AND THE AO HAS REFERRED THIS AT PAR A NO.12.2 OF HIS ORDER. 3. THE ID CIT(A) ERRED IN HOLDING THAT THE AO HAS N OT MADE OUT A REASON FOR INVOKING PROVISIONS OF SECTION 13(L)(C )OF THE IT. ACT IN RESPECT OF PAYMENT MADE TO M/S. VINAYAKA EDUCATIONAL TRUST. 3.1 THE ID. CIT (A) FAILED TO APPRECIATE THAT THE A O IN HIS ORDER MENTIONED THAT THERE IS NO INTEREST AND SECURITY PR OVIDED IN THE ABOVE TRANSACTION. - - ITA 2857 & 2858/16 6 4. THE ID CIT(A) ERRED IN HOLDING THAT THERE IS NO VIOLATION OF SECTION 13(1)(C ) NI RESPECT OF ADVANCE OF RS.2.50 CRORES G IVEN TO M/S. VGS ESTATES. 4.1 THE ID. CIT (A) OUGHT TO HAVE APPRECIATED THAT MS. ARTHI GENESAN W/O OF THE MANAGING TRUSTEE IS THE DIRECTOR OF THE COMPANY AND THE ASSESSEE FAILED TO SUBMD SUCH DETAIL IN THE AUDIT R EPORT IN FORM LOB DATED 22.8.2012 THOUGH THIS AMOUNT WAS OUTSTAND ING. 5. THE ID CIT(A) ERRED IN HOLDING THAT ADVANCES MAD E BY THE TRUST TO THE CONCERNS IN WHICH THE TRUSTEES ARE INTERESTED A RE NOT ATTRACTED BY THE PROVISIONS OF SEC.13(1)(D) R.W. SEC.11(5) OF THE IT. ACT. 5.1 THE ID. CIT (A) FAILED TO APPRECIATE THAT THE I NTEREST AMOUNT SUBSEQUENTLY PURPORTED TO BE PAID TO THE ASSESSEE T RUST FORTIFIES THAT THE AMOUNT INVOLVED IS ONLY AN INVESTMENT. 6. THE ID. CIT (A) OUGHT TO HAVE APPRECIATED THAT F OR THE A.Y. 2011-12 IN ASSESSEES OWN CASE, THE ID. CIT (A) CONFIRMED THE ORDER OF THE AO ON SIMILAR ISSUES IN ITA. NO.114/14-15 DATED 9.3.20 15 AND THE HONBLE ITAT IN ITA NO.1548/MDS/2015 DATED 06.07.20 15 HAS DISMISSED THE APPEAL FILED BY THE ASSESSEE IN I/MIN E. THUS THE ISSUES HAVE REACHED FINALITY. - - ITA 2857 & 2858/16 7 3. THE FACTS OF THE CASE IN RESPECT OF THE ISSUE RE LATING TO THE ADDITION ON ACCOUNT OF INTEREST ON ADVANCES PURPORT ED TO BE DIVERTED TO INTERESTED PARTIES WORKED OUT BY THE AO AMOUNTING TO 2,07,55,200/- FOR THE A.Y. 2012-13, ARE THAT THE A O OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION, THERE WAS AN OPENING BALANCE OF 16.91 CRORES LENT TO ITS FOUNDER AND MANAGING TRUSTEE AS ALSO 1.44 CRORES OUTSTANDING WITH M/S. ARTI ASSOCIATES AND 3.5 CRORES FOR THE THALAMBUR PROPERT Y RESPECTIVELY. ACCORDING TO THE AO THE INSTANT TRUS T HAD PAID BACK INTEREST CALCULATED AT THE RATE OF 10% ON HIGH ER INTEREST BEARING TERM LOANS OF 16,46,15,520/- BORROWED FROM ICICI BANK AND THEREFORE THE DIFFERENTIAL BETWEEN THE LOWER RA TE OF INTEREST OF REPAYMENT BY THE ASSESSEE TRUST VIS--VIS THE HIGHE R INTEREST RATE BEARING MONIES BORROWED FROM ICICI BANK ADVANCED TO THE ASSESSEE, MEANT DIVERSION OF FUNDS TO SUCH INTEREST ED PERSONS IN TERMS OF SEC.13(3) OF THE ACT AND CAUGHT WITHIN THE MISCHIEF OF SEC.13(1)(C) OF THE ACT VIZ., DR. ISHARI GANESH, TH E MANAGING TRUSTEE OF THE ASSESSEE TRUST AND ARTI ASSOCIATES ( WHEREIN THE WIFE OF THE MANAGING TRUSTEE HELD 95% OF SHARES) WH ICH CLEARLY AMOUNTED TO VIOLATION OF SEC.13(2) R.W.SEC.13(3) AN D CAUGHT - - ITA 2857 & 2858/16 8 WITHIN THE MISCHIEF OF SEC.13(1)(C) OF THE ACT. TH E AO, FURTHER, OBSERVED THAT SINCE THE INTEREST ON THE ADVANCE FOR THE PROPOSED PURCHASE OF THE SAID LAND AT MANJAKARANAI DATED BAC K TO THE INITIAL DATE OF ADVANCE, DUE TO THE LONG TIME LAG I NVOLVED, SUCH ADVANCE LOST ITS CHARACTER AS AN ADVANCE AND PARTOO K THE CHARACTER OF INVESTMENT AND SINCE SUCH INVESTMENTS AGAIN CONSTRUED BY THE AO TO BE IN MODES OTHER THAN MODES AUTHORIZED / SPECIFIED IN SEC.11(5) OF THE ACT, THE ASSESSE THEREFORE ALSO VIOLATED THE PROVISIONS OF SEC.11(5) AND WAS THEREFORE CAUGHT WITHIN THE MISCHIEF OF PROVISIONS OF SEC.13(1)(D) TOO, WHEREBY ACCORDING TO THE AO, EXEMPTION U/S.11 WAS RENDERED INOPERATIVE AND THEREFORE BY VIRTUE OF SEC .13(8) ANY INCOME OF THE TRUST INCLUDING CORPUS DONATION ETC. WHICH WAS OTHERWISE EXEMPT U/S.11(1)(D) BECAME TAXABLE AT THE MAXIMUM MARGINAL RATE. 4. THE CIT(APPEALS) OBSERVED THAT AS THE SAID PROPE RTY WAS ITSELF TAKEN AS COLLATERAL SECURITY FOR THE TRUST, IT COULD NOT BE SAID TO BE A VIOLATION OF THE PROVISION OF SEC.13(2)(A) OF THE ACT, WHICH SECTION EVIDENTLY, IS NOT A BLANKET PROVISION ENTAI LING PROVISION - - ITA 2857 & 2858/16 9 FROM DEALING WITH INTERESTED PARTIES, SINCE, IT HAS EXCEPTIONS PROVIDED IN THE PROVISION ITSELF WHEREBY ANY INCOME OF THE TRUST COULD BE LENT TO ANY INTERESTED/RELATED PERSON SPEC IFIED IN SEC.13(3) OF THE ACT WITH EITHER ADEQUATE SECURITY OR ADEQUATE INTEREST OR BOTH, AS IT WAS IN THE INSTANT CASE AND THEREFORE, COULD NOT BE TREATED AS VIOLATION OF SEC.13(1)(C) R.W.SEC .13(2)(A) AND 13(3) OF THE ACT AS CONTENDED BY THE AO LEADING HIM TO DISALLOW THE ENTIRE AMOUNT AND ADDED BACK THE SAME TO THE TO TAL INCOME OF THE ASSESSEE TO BE SUBJECTED TO MAXIMUM MARGINAL RATE. ACCORDINGLY, THE CIT(APPEALS) DID NOT AGREE WITH TH E AOS ACTION IN TREATING THE ADVANCES FOR PROPERTY OUTSTANDING A S ON 31.3.2012 INCLUDING THE CLOSING BALANCE OF 7,79,00,000/- AND TREATING THE SAME AS LOAN MADE TO INTERESTED PERSON S IN VIOLATION OF SEC.13(1)(C) R.W.SEC.13(2) AND 13(3) OF THE ACT IN RELATION TO THE MANJAKARANAI PROPERTY, WHICH FROM THE FACTS OF THE CASE AND THE MATERIAL ON RECORD CLEARLY APPEARS TO BE ADVANC E MADE OF AN AMOUNT OF 16.91 CRORES AND WHEREFROM SUBSEQUENTLY AN AMOUNT OF 9.12 CRORES WAS DULY AND UNDISPUTEDLY REFUNDED BY WAY OF REPAYMENT SUBSEQUENT TO THE CANCELLATION OF AGREEMENT FOR SALE DATED 3.10.2011 AS STATED EARLIER LEAVING A CLOSING - - ITA 2857 & 2858/16 10 BALANCE OF 7,79,00,000/- I.E. ( 16,91,00,000 9,12,00,000 = 7,79,00,000) AS ON 31.3.2012 FOR WHICH ALSO THE AS SESSEE TRUST WAS ADEQUATELY COMPENSATED AND SECURED. 4.1 ACCORDING TO THE CIT(APPEALS), AS TO THE ISSUE WHETHER THE INTEREST PAID BY THE MANAGING TRUSTEE TO THE AS SESSEE TRUST IS ADEQUATE OR NOT IT IS SEEN THAT THE TOTAL COMPEN SATION AND INTEREST RECEIVED BY THE ASSESSEE TRUST FROM THE MA NAGING TRUSTEE AS PER DETAILED WORKING FROM 1.4.2011 TO 31 .3.2012 RELATING TO THE AYS IN APPEAL IS AS UNDER: A) COMPENSATION RECEIVED FOR CANCELLING THE AGREEME NT 25,00,000 B) AMOUNT FORFEITED BY THE MANAGING TRUSTEE 20,00,000 C) INTEREST PAID BY MANAGING TRUSTEE (FOR THE PERIO D 2,81,81,993 UPTO 31/03/2012) D) INTEREST PAID BY MANAGING TRUSTEE ON 31/03/2013 (FOR THE PERIOD FROM 01/04/2012 TO 31/03/2013 80,10,085 TOTAL 4,06,92,078 4.2 THEREFORE, ACCORDING TO THE CIT(APPEALS), THE A SSESSEE TRUST, ON ACCOUNT OF ADVANCING THE ABOVE AMOUNTS TO THE MANAGING TRUSTEE, IN ADDITION TO THE PRINCIPLE AMOU NT, HAD RECEIVED A SUM OF 4,06,92,078/-, IN THE FORM OF COMPENSATION AND INTEREST. IN OTHER WORDS, THE MOMENT THE SALE AGREEMENT - - ITA 2857 & 2858/16 11 WAS CANCELLED, THE ENTIRE AMOUNT WAS TREATED AS LOA N AND THE MANAGING TRUSTEE REPAID THE ENTIRE AMOUNT WITH SUIT ABLE COMPENSATION AND INTEREST. THUS, THE CIT(APPEALS) OBSERVED THAT IT CANNOT BE SAID THAT THE TRANSACTION WAS WIT HOUT ANY CONSIDERATION. AS TO WHETHER THE ABOVE CONSIDERATI ON IS ADEQUATE OR NOT, THE AO IN HER ORDER NOTED THAT THE ASSESSEE TRUST ADVANCED A SUM OF 16.91 CRORES AS ON 31.3.2011, OUT OF WHICH AMOUNTS AFORESAID WAS RECEIVED BACK ON CANCEL LING THE AGREEMENT ON 3.10.2011 AND THEREAFTER LEAVING A CLO SING DEBIT BALANCE OF 7.79 CRORES AS ON 31.3.2012. HOWEVER, IT IS NOTIC ED BY THE CIT(APPEALS) THAT IN ADDITION TO THE ABOVE L AND ADVANCE TRANSACTION WITH THE MANAGING TRUSTEE THERE WERE OT HER FINANCIAL TRANSACTIONS WITH DR. ISHARI K. GANESH (SHOWN AS IN DIVIDUAL ACCOUNT), M/S. VELS HOLDINGS AND INVESTMENT P LTD., MS. AARTHI AND M/S.AARTHI ASSOCIATES P. LTD. THERE WERE ALWAY S POSITIVE (CREDIT) BALANCES IN THESE ACCOUNTS I.E. THE ASSESS EE TRUST ALWAYS OWED SUBSTANTIAL AMOUNTS TO THESE PERSONS. THE OUT STANDING CREDIT BALANCES REPAYABLE TO THESE PERSONS AT THE E ND OF THE FINANCIAL YEAR 2011-12 ARE 1,15,00,000/-. - - ITA 2857 & 2858/16 12 4.3 THOUGH THE AO TREATED THE ADVANCE FOR PURCHASE OF LAND FROM THE MANAGING TRUSTEE AS A LOAN TRANSACTION AS VIOLATION OF SEC.13(1)(C) OF THE ACT, SHE HAS NOT TAKEN THE OTHE R TRANSACTIONS WITH THE TRUSTEES / THEIR RELATED PERSONS, ESPECIAL LY WHERE THE ASSESSEE TRUST RECEIVED SUBSTANTIAL AMOUNTS, AND NE ITHER HAS SHE CONSIDERED THE TRANSACTIONS WITH DR. ISHARI GAN ESH (AT INDIVIDUAL LEVEL), M/S. VELS HOLDINGS & INVESTMENT P. LTD., MS. AARTHI AND M/S. AARTHI ASSOCIATES P. LTD., WHERE TH ERE ARE SUBSTANTIAL CREDIT BALANCES. 4.4 HOWEVER, THE CIT(APPEALS) OBSERVED THAT T HE ASSESSEE TRUST DID NOT GO FOR SQUARING UP OR NETTING OFF TH ESE TRANSACTIONS. INSTEAD THE ASSESSEE SHOWED THESE TRANSACTIONS SEPA RATELY AND INDEPENDENTLY, IN THE NAMES OF DR. ISHARI K. GANESH (INDIVIDUAL ACCOUNT), M/S. VELS HOLDINGS AND INVESTMENT P LTD. IN ORDER TO KEEP TRACK AND FOR BETTER UNDERSTANDING OF THE AFFA IRS OF DIFFERENT ENTITIES OF THE GROUP. HENCE, THERE WAS A SEPARATE DEBIT BALANCE APPEARING IN THE NAME OF LAND ADVANCE ACCOUNT AND CREDIT BALANCES IN THE NAMES OF DR. ISHARI K. GANESH (INDI VIDUAL ACCOUNT), M/S. VELS HOLDINGS AND INVESTMENT P LTD. THEREFORE, THE ASSESSEES EXPLANATION THAT THE TRANSACTIONS AN D THE - - ITA 2857 & 2858/16 13 AMOUNTS IN EACH ACCOUNT WERE SHOWN SEPARATELY, INST EAD OF SQUARING-UP/NETTING OFF, ONLY IN ORDER TO FACILITAT E CLEAR UNDERSTANDING AND TO TRACK SUCH TRANSACTIONS, COULD BE ACCEPTED AS LOGICAL AND REASONABLE, PARTICULARLY IN THE CONT EXT OF THE FACTS AND CIRCUMSTANCES OBTAINED IN THE INSTANT CASE. 4.5 FURTHER, THE LEDGER EXTRACTS OF LAND ADVANCE ACCOUNT, DR. ISHARI K. GANESH (INDIVIDUAL ACCOUNT), M/S. VELS HO LDINGS AND INVESTMENT P LTD. ETC, AS ON 31.3.2012 AND 31.3.201 3, WERE CALLED FOR AND PERUSED DURING THE COURSE OF APPELLA TE PROCEEDINGS BY THE CIT(APPEALS). APART FROM THE NE T OPENING BALANCE AND THE CLOSING BALANCES AS ON 1.4.2011 / 1 .4.2012 AND 31.3.2012 / 31/12/2013 RESPECTIVELY THE COMBINED NE T BALANCES (I.E. BALANCES OF LAND ADVANCE ACCOUNT, DR. ISHARI K. GANESH (INDIVIDUAL ACCOUNT), M/S. VELS HOLDINGS AND INVEST MENT P LTD. (COMBINED TOGETHER) WERE EXAMINED ON DAILY BASIS AN D OBSERVED BY THE CIT(APPEALS) THAT THE TOTAL (ACTUAL) INTERES T RECEIVED BY THE ASSESSEE FROM THE LAND ADVANCE ACCOUNT WAS GREA TER THAN THE INTEREST WORKED-OUT ON THE TOTAL COMBINED BALAN CE STANDING AGAINST THESE THREE NAMES COMBINED TOGETHER. THUS, THE ASSESSEE TRUST IS MORE BENEFITTED FROM THESE TRANSA CTIONS RATHER - - ITA 2857 & 2858/16 14 THAN THE OTHER WAY ROUND AS CONTENDED BY THE AO. T HE CONSOLIDATED AMOUNTS DUE TO/FROM LAND ADVANCE ACCOU NT OF DR. ISHARI K. GANESH (INDIVIDUAL ACCOUNT), M/S. VELS HO LDINGS AND INVESTMENT P LTD. AND THE NET COMBINED BALANCES AND THE CHARGEABLE INTEREST @ 10% PER ANNUM WORKED OUT IN D ETAIL. 4.6 ACCORDING TO THE CIT(APPEALS), THE TOTAL AM OUNT OF INTEREST INCLUDING THE COMPENSATION OF 25,00,000/- AND AMOUNT FORFEITED OF 20,00,000/-(WHICH APPEARS TO HAVE BEEN IGNORED BY THE AO IN HER WORKING) RECEIVED BY THE ASSESSEE TRU ST FROM THE MANAGING TRUSTEE, IS AS UNDER: A) COMPENSATION RECEIVED FOR CANCELLING THE AGREEME NT 25,00,000 B) AMOUNT (RIGHT) FORFEITED BY THE MANAGING TRUSTEE 20,00,000 C) INTEREST PAID BY MANAGING TRUSTEE ON 1.4.2012 2,81,81,993 FOR THE PERIOD UPTO 31/03/2012) D) INTEREST PAID BY MANAGING TRUSTEE ON 31/03/2013 (FOR THE PERIOD FROM 01/04/2012 TO 31/03/2013 80,10,085 TOTAL COMPENSATION/INTEREST RECEIVED FROM DR. GANE SH 4,06,92,078 4.7 FROM THE ABOVE FIGURES, UNCONTROVERTED BY THE RESPECTIVE AO/S, THE CIT(APPEALS) OBSERVED THAT THE ASSESSEE T RUST RECEIVED A SUM OF 4,06,92,078/- BY SWAY OF INTEREST AND COMPENSATION AS AGAINST THE LOGICALLY CHARGEABLE IN TEREST OF - - ITA 2857 & 2858/16 15 3,27,18,543/- BEING THE INTEREST CALCULATED @ 10% P ER ANNUM, THE RATE OF INTEREST AT WHICH THE ASSESSEE TRUST BO RROWED THE AMOUNTS FROM THE FINANCIAL INSTITUTIONS INCLUDING I CICI AND THUS, THE ASSESSEE TRUST WAS IN FACT BENEFITTED BY AN EXT RA SUM (INTEREST) OF 79,73,535/- (I.E. 4,06,92,078 3,27,18,543). EVEN IF THE CREDIT BALANCES STANDING IN THE NAMES O F DR. ISHARI K. GANESH (INDIVIDUAL ACCOUNT), M/S. VELS HOLDINGS AND INVESTMENT P LTD. ARE NOT CONSIDERED FOR THE PURPOSE OF CHARGI NG INTEREST ON THE LAND ADVANCES GIVEN TO THE MANAGING TRUSTEE, TH E TOTAL INTEREST WOULD WORK OUT TO : A) INTEREST TO BE PAID BY MANAGING TRUSTEE FOR THE PERIOD UPTO 31.3.2012 3,16,15,945 B) INTEREST TO BE PAID BY MANAGING TRUSTEE FOR THE PERIOD FROM 1.4.2012 TO 31.3.2013 92,06,989 TOTAL 4,08,22,934 4.8 ACCORDING TO THE CIT(APPEALS), EVEN THOUG H THE AO HAS RELIED ON THE CASE OF SRI PONGALIA JAIN SWETAMBAR M ANDIR V. CIT (168 ITR 516), RAJ., WHEREIN IT HAS BEEN STATED THA T FOR THE PURPOSE OF DETERMINATION OF ADEQUATE RATE OF INTERE ST FOR THE PURPOSE OF SEC.13(2)(A) THE SAME COULD BE CONSIDERE D ADEQUATE ONLY IF IT IS EQUAL TO THE RATE OF INTEREST PAID BY BANKS ON DEPOSIT - - ITA 2857 & 2858/16 16 AND EVENTHOUGH, ACCORDINGLY FOR THE YEAR UNDER CONS IDERATION, THE AO HAS HERSELF STATED THAT THE THEN PREVAILING BANK DEPOSIT RATE OF INTEREST WAS 10%, THE AO HAS FOR SOME INEXP LICABLE AND UNSPECIFIED REASON, APPLIED A RATE OF 12% PAYABLE B Y THE TRUST AND CALCULATED AS UNDER WHICH AS ALREADY POINTED, W AS OVER AND ABOVE THE REPAYMENT OF 3,86,92,077/- INCLUSIVE OF INTEREST CALCULATED AND LEVIED BY THE MANAGING PARTNER SUO M OTO AT 10%/12%/14% ON DIMINISHING BALANCES COMPENSATED TO THE ASSESSEE AND THEREFORE THERE WAS NO QUESTION OF LEV YING ADDITIONAL DIFFERENTIAL INTEREST OF (2% I.E. (12% - 10%) WORKED OUT BY THE AO, TOTALING TO 2,07,55,200/- REDUCED FROM THE ASSESSEES ALLOWABLE EXPENDITURE AS UNDER : 16,91,00,000/- 1.4.2011 TO 30.9.2011 FOR 6 MONTHS AT 12% 1,01,46,000 7,79,00,000 X 6/12 X12% __ 46,74,000 1,48,20,000 1,48,20,000 MADURAI PROPERTY AT 12% OF 1,44,60,000 17,35,200 (FOR 1 YEAR ARTI ASSOCIATES) THALAMBUR PROPERTY AT 12% OF 3,50,00,000 42,00,000 ------------------- 2,07,55,200 ------------------- - - ITA 2857 & 2858/16 17 4.9 ACCORDING TO THE CIT(APPEALS), NOW, IT IS W ELL SETTLED INCLUDING IN THE LAND MARK CASE OF CIT V. SHOORJI V ALLABHDAS & CO. (46 ITR 146 [SC]) AND GODHRA ELECTRICITY COMPAN Y LIMITED V. CIT (225 ITR 746 [SC]) THAT INCOME TAX IS A LEVY ON INCOME AND THAT NO DOUBT INCOME TAX TAKES INTO ACCOUNT TWO POINTS OF TIME AT WHICH THE LIABILITY TO TAX IS ATTRACTED I.E . THE ACCRUAL OF INCOME OR ITS RECEIPTS BUT THE SUBSTANCE OF THE MAT TER IS THE INCOME AND IF INCOME DOES NOT RESULT AT ALL THERE C ANNOT BE A TAX EVEN THOUGH IN BOOK KEEPING AN ENTRY IS MADE ABOUT A HYPOTHETICAL INCOME WHICH DOES NOT MATERIALIZE. BY THE SAME LOGIC AND ANALOGY AND GOING BY THE SPIRIT OF THE RA TIO OF THE ABOVE MENTIONED CASES, THE CIT(APPEALS) OBSERVED THAT I T CAN SAFELY BE SAID THAT AS THERE IS NO MANDATE IN THE IT ACT T O LEVY TAX ON HYPOTHETICAL INCOME THERE IS NO MANDATE IN THE IT A CT IN TRYING TO WORK OUT HYPOTHETICAL EXPENDITURE TO BE REDUCED FRO M THE ALLOWABLE EXPENDITURE AS ERRONEOUSLY EFFECTED BY TH E AO, VIDE HER WORKING OUT THE DIFFERENTIAL INTEREST AFORESAID . 4.10 FURTHER, THE CIT(APPEALS) DID NOT AGREE WIT H THE CONTENTIONS AND ACTION OF THE AO AND OBSERVED THAT SINCE, UNDER NO CIRCUMSTANCES CAN AN ADVANCE TOWARDS PURCHASE OF LAND - - ITA 2857 & 2858/16 18 WHICH HAS NOT BEEN CONTROVERTED BY THE AO, BUT RATH ER ACKNOWLEDGED BY HERSELF TO BE INDEED IN RELATION TO SUCH ADVANCES FOR THE PURCHASE OF LAND AT MANJAKARANAI B E HELD AS LOSING ITS INTEGRAL CHARACTER OF ADVANCE AND PARTAK E THE CHARACTER OF INVESTMENT AND BEING IN THE MODES OTHER THAN THE MODES AUTHORIZED BY SEC.11(5) OF THE ACT, AS CONTENDED BY HER. 4.11 ACCORDING TO THE CIT(APPEALS), THE TERM DE POSITING / INVESTING REFERRED TO IN SEC.11(5) HAS NOT BEEN DEF INED IN THE ACT. AS SUCH, AND THEREFORE, ITS MEANING AS PER COMMON E NGLISH USAGE AND GENERAL UNDERSTANDING IS TO BE ADOPTED, A S HELD IN A PLETHORA OF CASE LAWS ON THE ISSUE. THE OXFORD DIC TIONARY DEFINES THE WORD DEPOSITING IN ORDINARY PARLANCE, IN ITS VERB FORM AS A SUM OF MONEY THAT IS GIVEN AS THE FIRST PART OF A LARGER PAYMENT OR TO PAY A SUM OF MONEY THAT ONE WILL GET BACK IF ONE RETURNS IN GOOD CONDITION OR TO PUT SOMETHING VALUA BLE OR IMPORTANT IN A PLACE WHERE IT WILL BE SAFE OR A SUM OF MONEY THAT IS PAID INTO A BANK ACCOUNT. THE TERM INVESTING SIMILARLY, IS DEFINED IN THE OXFORD DICTIONARY AS TO BUY PROPERT Y, SHARES IN A COMPANY ETC., IN THE HOPE OF MAKING PROFIT OR SPEND ING MONEY ON SOMETHING IN ORDER TO MAKE IT BETTER OR MORE SUCCES SFUL OR DOING - - ITA 2857 & 2858/16 19 SOMETHING TO SPEND TIME / ENERGY / EFFORT ETC. ON S OMETHING THAT IS GOOD OR USEFUL OR TO BUY SOMETHING THAT IS EXPEN SIVE BUT USEFUL. 4.12 HE OBSERVED THAT QUITE EVIDENTLY GIVEN TH E ABOVE DEFINITIONS, ADVANCES FOR PURCHASE OF LANDS AS IT W AS IN THE CASE OF THE ASSESSEE WOULD NOT FALL WITHIN THE DEFINITIO NS OF THE ABOVE CATEGORIES ELUCIDATED AFORESAID. IN VIEW OF THE DE FINITIONS, THE AOS IMPLIEDLY TREATING THE ADVANCES PAID TOWARDS P URCHASE OF PROPERTY AS EITHER BEING INVESTMENT OR DEPOSIT IN N ON-SPECIFIED OR NON-APPROVED MODES, NOT ALLOWABLE U/S.11(5) OF THE ACT, APPEARS TO BE CLEARLY BASED ON AN ERRONEOUS INTERPRETATION OF THE ABOVE TERMS INVESTING / DEPOSITING IN TERMS OF SEC.11 (5) OF THE ACT. THEREFORE, INVOKING THE PROVISIONS OF SEC.13(1)(D) OF THE ACT AS A CONSEQUENCE TO SUCH ERRONEOUS INTERPRETATION THAT T HE ASSESSEE HAD THEREFORE CONTRAVENED THE PROVISIONS OF SEC.11( 5) OF THE ACT, IS CLEARLY NOT JUSTIFIABLE, EVEN FROM THE ACCOUNTIN G POINT OF VIEW. 4.13 FURTHER, THE CIT(APPEALS) OBSERVED THAT TH ERE IS NO GAINSAYING THE FACT THAT IN ORDER TO AVAIL THE BENE FIT OF SEC.11(2) OF THE ACT, BOTH THE INTEREST CHARGED BY THE TRUST AND THE SECURITY - - ITA 2857 & 2858/16 20 OFFERED IN THIS REGARD SHOULD BE ADEQUATE AND SUFFI CIENT WHICH IN THE CASE OF THE ASSESSEE WAS INDEED SO SINCE THE SA ID LANDS ITSELF WERE ADMITTEDLY AND UNDISPUTABLY TREATED AS SECURITY AND FURTHER IT WAS SEEN THAT AN AMOUNT OF 3,86,92,077/- WHICH WAS AS PER THE BANK RATE OF 10% INTEREST AND WHICH ALSO INCLUDED AN AMOUNT OF 25,00,000/- COMPENSATION OFFERED BACK TO THE TRUST BY THE TRUSTEE SUBSEQUENT TO THE CANCELLATION OF TH E AGREEMENT OF SALE OF THE SAID MANJAKARANAI PROPERTY AS STATED EA RLIER. ACCORDING TO THE CIT(APPEALS), THE AO HAS NOWHERE M ADE OUT A CREDIBLE CASE THAT THE ABOVE MENTIONED COMPENSATION WORKED OUT BY WAY OF INTEREST OVER AND ABOVE THE PRINCIPAL AMOUNT WAS LOWER THAN THE BANK RATE OF INTEREST AT WHICH THE I NTEREST BEARING LOANS WERE BORROWED FROM ICICI BANK. THEREFORE, HE R WORKING OUT OF AN ADDITIONAL DIFFERENTIAL INTEREST OF 2,07,55,200/- WHICH SHE REGARDED AS ADEQUATE RATE OF INTEREST OF THE PU RPOSES OF SEC.13(2)(A) OF THE ACT, BY RELYING ON THE CASE LAW OF SRI PUNGALIA JAIN SEWTAMBAR MANDIR V. CIT (168 ITR 506 [RAJ]), W HEREIN IT HAS BEEN STATED THAT THE RATE OF INTEREST WOULD BE CONSIDERED AS ADEQUATE IF IT IS EQUAL TO THE RATE OF INTEREST PAY ABLE TO THE BANK ON DEPOSITS WHICH WAS 10% IN THAT CASE AND THEREFOR E, APPLYING - - ITA 2857 & 2858/16 21 THE RATE OF 12% IS QUITE CLEARLY ERRONEOUS, UNREASO NABLE AND ARBITRARY, PARTICULARLY CONSIDERING THE FACT THAT I N THE CASE LAW THAT THE AO, HERSELF HAS RELIED ON, ADEQUATE RATE OF INT EREST WAS TAKEN AT ONLY 10% AS STATED EARLIER AND THEREFORE, THE FACTS AND EVEN THE RATES OF INTEREST TAKEN THEREIN IS DISTING UISHABLE FROM THE FACTS OBTAINED IN THIS CASE. 4.14 THEREFORE, ACCORDING TO THE CIT(APPEALS), IT IS HIGHLY IMPROBABLE AND UNFAIR TO HOLD THAT THE FUNDS OF THE ASSESSEE TRUST HAD BEEN USED FOR THE BENEFIT OF THE TRUSTEES / INT ERESTED PERSONS EITHER DIRECTLY OR INDIRECTLY AND THEREFORE SINCE T HE INTEREST AND THE COMPENSATION ACTUALLY RECEIVED BY THE ASSESSEE TRUST FROM THE MANAGING TRUSTEE WAS HIGHER THAN THE AMOUNT OF INTEREST TO BE CALCULATED @ 10%, THE RATE OF INTEREST AT WHICH THE ASSESSEE TRUST WAS BORROWING THE FUNDS, THE AMOUNT OF INTERE ST CHARGED / RECEIVED BY THE ASSESSEE FROM THE MANAGING TRUSTEE COULD BE SAID TO BE MORE THAN ADEQUATE IN TERMS OF SEC.13(2) (A) OF THE ACT. 4.15 AS FOR ADEQUATE SECURITY RELATING TO THE A FORESAID LAND PURCHASE, SINCE, THE ASSESSEE TRUST AND THE MANAGIN G TRUSTEE - - ITA 2857 & 2858/16 22 HAD ENTERED INTO AN AGREEMENT FOR SALE OF LAND AN D IT WAS IN THE FORM OF A WRITTEN AGREEMENT ON REVENUE STAMP PAPER, IRRESPECTIVE OF THE INTENTIONS OF THE PARTIES, THE SAID AGREEMENT WAS LEGALLY VALID AND SINCE BASED ON THIS DOCUMENT ONLY THE ASSESSEE TRUST ADVANCED THE ABOVE MENTIONED SUMS TO THE MANAGING TRUSTEE AND AS SUCH, LEGALLY WRITTEN AGREE MENT FOR SALE OF THE LANDS WAS IN THE POSSESSION OF THE ASSE SSEE TRUST, IN CASE OF ANY PROBABLE DEFAULT BY THE MANAGING TRUSTE E, THE TRUST COULD TAKE LEGAL ACTION BY GETTING THE LAND REGISTE RED IN ITS NAME ETC., AND THUS, THE SAID DOCUMENT OF AGREEMENT FOR SALE OF THE LAND COULD BE SAID TO SERVE AS ADEQUATE SECURITY FO R THE AMOUNTS ADVANCED, EVEN IF THE AMOUNT PAID WAS TO BE TREATED AS A FINANCIAL LOAN TRANSACTION ONLY, AS CONTENDED BY TH E AO. THEREFORE, EVEN IT THE AOS SAID CONTENTION THAT TH E AMOUNTS PAID BY THE ASSESSEE TRUST TO THE MANAGING TRUSTEE, WAS A LOAN CAMOUFLAGED IN THE FORM OF ADVANCE FOR LAND PURCHAS E, WAS TO BE CONSIDERED, STILL THE TRANSACTION WAS BACKED BY ADE QUATE CONSIDERATION AS WELL AS SUFFICIENT SECURITY AND TH EREFORE, THE EXCEPTION CONTAINED IN THE PROVISIONS OF CLAUSE (A) OF SUB-SEC.(2) - - ITA 2857 & 2858/16 23 OF SEC.13, CLEARLY KEEPS THE PRESENT TRANSACTIONS O UTSIDE THE SCOPE OF SEC.13(2)(A) R.W.S.13(1)(C) OR 13(1)(D) OF THE ACT. 4.16 FURTHER, THE CIT(APPEALS) OBSERVED THAT BOTH F OR THE MADURAI PROPERTY WHEREIN THE BALANCE 1,44,60,000/- WAS OUTSTANDING AGAINST ARTHI ASSOCIATES WHEREIN THE WI FE OF THE MANAGING TRUSTEE HELD MAJORITY SHARES AND ALSO THAL AMBUR PROPERTY, WHEREIN THE BALANCE WAS SEEN TO BE 3,50,00,000/-, THE INTEREST THEREON FOR THE PURPOSE OF REPAYMENT T O THEM, HAVE BEEN WORKED OUT AND REMITTED BY THE MANAGING PARTNE R OF THE ASSESSEE AT 12% AND 14% FOR THE FY 2011-12 AND 2012 -13 AS EVIDENCED BY THE WORKING OF THE SAME. 4.17 ACCORDINGLY, THE CIT(APPEALS) RELIED ON THE ORDER OF TRIBUNAL FORR THE AY 2010-11 IN ASSESSEE OWN CASE, WHICH ALSO DEALT WITH THE SAME ISSUE RELATING TO THE SAID ADVA NCE WHICH WAS INITIALLY ADVANCED DURING THE FY 2009-10, AND THERE FORE, THE TRIBUNAL DECIDE THE ISSUE ON HAND, AS TO WHETHER TH E ADVANCE MADE FOR PURCHASE OF LAND CAN STRICTLY BE TREATED A S LOAN TO INTERESTED PERSONS IN VIOLATION OF SEC.13(2)(A) OR EVEN 13(2)(B) OF THE ACT IN THE CASE OF THE ASSESSEE AND WHAT CONSTI TUTES MARKET - - ITA 2857 & 2858/16 24 VALUE OF LAND AND WHETHER THE PROHIBITION U/.S13(2) OF THE ACT IN BENEFITTING INTERESTED PERSONS AS SEC.13(3) OF THE ACT WAS A BLANKET PROHIBITION OR NOT, ALL OF WHICH HAVE BEEN CONSIDERED AND DELIBERATED UPON BY THE TRIBUNAL IN A COGENT AND LO GICAL MANNER AND WHICH IS PERTINENT AND CRUCIAL IN DETERMINING T HE AFORESAID GROUNDS PARTICULARLY WITH REFERENCE TO THE PROPOSED PURCHASE OF THE MANJAKARANI PROPERTY FOR THE PURPOSE OF ESTABLI SHING A MEDICAL COLLEGE AND DEEMED UNIVERSITY IN ORDER TO E FFECTUATE THE OBJECT OF THE ASSESSEE TRUST. 5. THE CIT(APPEALS), FURTHER OBSERVED THAT IN V IEW OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF DASA BALINJIKA SEVA SANGAM V. CIT (240 ITR 854)(MAD) AS ALSO THE DECISION OF TRIBUNAL, IN ASSESSEES OWN CASE, THE T RANSACTION OF PAYMENT OF ADVANCE FOR PURCHASE OF LAND TO THE MANA GING TRUSTEE AS ALSO OF THE MADURAI AND THALAMBUR PROPER TIES, EVEN IF TREATED AS LOAN TRANSACTIONS MORE FULLY SECURED AND ADEQUATELY COMPENSATED AND HENCE NOT AMOUNTING TO A VIOLATION U/S.13(1)(C) R.W. SEC.13(2)(A) OF THE ACT. THEREFO RE, THE CIT(APPEALS) OBSERVED THAT THE AO WAS R NOT JUSTIFI ED IN DENYING THE ASSESSEES CLAIM OF EXEMPTION U/S.11 AND THE AO S ACTION IS - - ITA 2857 & 2858/16 25 LEGALLY UNTENABLE AND THE ADDITION MADE THEREON OF 2,07,55,200/- IS TO BE DELETED. ACCORDINGLY, THE C IT(APPEALS) DIRECTED THE AO TO GRANT THE BENEFIT OF EXEMPTION U /S.11 OF THE ACT AS CLAIMED BY THE ASSESSEE. 6. THE NEXT ISSUE WITH REGARD TO ADDITION IN RESPEC T OF CORPUS DONATIONS AT 4.30 CRORES AND 3 CRORES RESPECTIVELY FOR THE AYS 2012-13 AND 2013-14, WITHOUT ANY WORTHW HILE DISCUSSION ON THE REASONS FOR HOLDING SO, LEADING T HE AO TO HOLD THE SAME AS CONTRAVENING THEREBY THE PROVISIONS OF SEC.13(1)(C) R.W. SEC.13(2) AND 13(3) AS ALSO THAT OF SEC. 11(5) R.W.SEC.13(3) AND 13(1)(D) AND SINCE THEREFORE BY VIRTUE OF SEC.1 3(8) OF THE ACT, EXEMPTION TO THE ASSESSEE U/S.11 BECAME INOPERATIVE AND THEREFORE, ANY INCOME INCLUDING THE SO-CALLED CO RPUS DONATIONS CONSTRUED BY THE AO GOT DISALLOWED AND ADDED BACK T O BE CHARGED AT THE MAXIMUM MARGINAL RATE AS PER THE THI RD PROVISO TO SEC.164(3) OF THE ACT, WHICH ACTION OF THE AO APPEA RS TO BE NOT ONLY BORNE OUT BY THE FACTS OBTAINED RELATING TO TH E TRUE NATURE OF THE SAME BUT ALSO A CLEARLY ERRONEOUS INTERPRETATIO N OF THE AFORESAID PROVISIONS OF LAW IN AS MUCH AS THE AMOUN T OF 4.30 CRORES AND 3 CRORES RESPECTIVELY TREATED PURPORTEDLY AT PAR B Y - - ITA 2857 & 2858/16 26 THE AO AS CORPUS DONATIONS ARE SEEN FROM THE BOOKS OF ACCOUNT AND OTHER MATERIAL TO BE IN FACT A RECEIPT AND NOT AN ADVANCE/DONATION OF CORPUS OF 4.30 CRORES FROM FOUR, INCLUDING THREE UNRELATED PARTIES / CONCERNS, AND IN FACT A T EMPORARY LOAN OF 3 CRORES ADVANCED TO BHAGWAN MAHAVEER MEMORIAL TRU ST, A 12AA REGISTERED AND 80G APPROVED TRUST HAVING SIMIL AR OBJECTS AS THAT OF THE ASSESSEE OF RUNNING EDUCATION INSTIT UTIONS FOR EFFECTUATING SUCH OBJECTS AS PER ITS TRUST DEED. 6.1 IT IS AN UNCONTROVERTED FACT THAT THE SAID DONA TIONS RECEIVED OF 4.30 CRORES FOR THE AY 2012-13 BY THE ASSESSEE BEING THE DONEE TRUST WAS APPLIED FOR THE PURPOSES MANDATED BY THE DONORS TOWARDS CORPUS/CAPITAL OF THE TRUST AND THEREFORE, THE ASSESSEE COULD NOT BE SAID TO HAVE CONTRAVENED ANY PROVISION OF THE ACT, MERITING ADDITION OF THE SAID AMOUNTS, AS EFFECTED TOTALLY ARBITRARILY BY THE AO. THE FACT THAT THE SAID 4.30 CRORES FOR AY 2012-13 WAS CAPITAL CONTRIBUTIONS TOWARDS DONATIONS IS CLEARLY EVIDENT FROM THE EXTRACT OF SUCH CORPUS RECEIVED BY THE ASSESSEE FROM THE FOUR PARTIES AS STATED EARLIER, THREE OF W HICH WERE TOTALLY UNRELATED IN TERMS OF SEC.13(3) OF THE ACT . - - ITA 2857 & 2858/16 27 7. THE CIT(APPEALS) HAS GONE THROUGH THE LETTER ISS UED BY THE CONCERNED PARTIES CONFIRMING THE DONATION OF CO RPUS AND OBSERVED THAT AS TO THE AMOUNT OF 3 CRORES FOR AY 2013-14 CONSTRUED AGAIN BY THE AO AS CORPUS DONATION IS C LEARLY ERRONEOUS IN VIEW OF THE FACT THAT THE AMOUNT OF 3 CRORES WAS ADVANCED AS LOAN FOR THE PURPOSE OF IMPARTING EDUCA TION AS ITS PRIMARY OBJECT WHICH IS ON PAR WITH THE OBJECTS OF THE ASSESSEE TRUST AND EVIDENTLY THERE IS NO BAR IN THE IT ACT A GAINST SUCH ADVANCEMENT OF LOAN TO SUCH OTHER TRUST DULY REGIST ERED / APPROVED. AGAIN, THERE ARE A PLETHORA OF CASES WHI CH CLEARLY HOLD THAT THERE IS NO BAR IN A 12AA REGISTERED TRU ST ADVANCING LOAN TO ANOTHER 12AA REGISTERED DONE, IN THIS CASE, BHAGWAN MAHAVEER MEMORIAL TRUST AND THERE IS NO MANDATE TO DENY EXEMPTION U/S.11 OF THE ACT EITHER DUE TO SUCH ADVA NCES BEING MADE, AS ERRONEOUSLY EFFECTED BY THE AO, IN THE ASS ESSEES CASE. 7.1 ACCORDING TO THE CIT(APPEALS) , IN THE CASE OF DIT V. ACME EDUCATIONAL SOCIETY, IT WAS HELD THAT ADVANCING OF INTEREST FREE LOAN BY ONE SOCIETY TO ANOTHER SOCIETY HAVING SAME OBJECTS, WHICH WAS ALSO THE CASE IN THE ASSESSEES CASE, WHE RE IT - - ITA 2857 & 2858/16 28 DONATED TO BHAGWAN MAHAVBEER MEMORAIL TRUST, AS MEN TIONED EARLIER, WOULD NOT AMOUNT TO ATTRACT SEC.13(1)(D) O F THE ACT AND, THEREFORE, EXEMPTION WAS ALLOWABLE U/S.11 THEREON. THE CIT(APPEALS), FURTHER RELIED ON THE DECISION IN THE CASE OF KUMUDAM ENDOWMENT V. ITO, WHEREIN IT HAS HELD THAT LOANS AND ADVANCES ARE DEBTS OWED TO CERTAIN PARTIES BY THE A SSESSEE, AS IT IS IN THE CASE OF THE ASSESSEE ALSO, AS STATED E ARLIER, AND COULD NOT BE REGARDED AS INVESTMENT OR DEPOSITS MADE BY THE ASSESSEE AND THEREFORE IT WAS ENTITLED TO EXEMPTION U/S. 11 OF THE ACT. 7.2 FURTHER, THE CIT(APPEALS) RELIED ON THE DEC ISION OF THE TRIBUNAL, MADRAS IN THE CASE OF JCIT V. BHAKTAVATSA LAM MEMORIAL TRUST (30 ITR (T) 263), WHEREIN IT HAS BEE N HELD THAT THERE CAN BE NO DENIAL OF EXEMPTION OF THE ASSESSEE WHEN INTEREST FREE LOAN WAS ADVANCED BY SUCH INSTITUTION TO OTHER CHARITABLE INSTITUTION REGISTERED U/S.12AA OF THE A CT HAVING SIMILAR OBJECTS, AS IT IS NOT IN VIOLATION OF THE PROVISION S OF SEC.13(1)(D) R.W.SEC.11(5) OF THE ACT. ACCORDING TO THE CIT(AP PEALS), THE ADDITION MADE BY THE AO ON ACCOUNT OF THE DONATION RECEIVED OF 4.23 CRORES FOR THE AY 2012-13 AND TEMPORARY LOAN ADVANCED - - ITA 2857 & 2858/16 29 TO BHAGWAN MAHAVEER MEMORIAL TRUST OF 3 CRORES FOR THE AY 2013-14 HOLDING IT TO BE CONTRAVENING PROVISIONS OF SEC.13(1)(C)/13(1)(D) R.W.SEC.13(2), 13(3) AND 11(5 ) OF THE ACT AND THEREBY DENYING EXEMPTION U/S.11 THEREON BY INV OKING SEC.13(8) OF THE ACT FOR THE RATHER SPECIOUS AND UN CONVINCING REASONS ADDUCED BY THE AO IS CONSIDERED TO BE LEGAL LY UNTENABLE AND THE ADDITION IS TO BE DELETED. AGGRI EVED BY THIS ORDER OF THE CIT(APPEALS), THE REVENUE IS IN APPEAL BEFORE US. 8. THE NEXT GROUND FOR THE AY 2013-14, WHERE IN THE ISSUES ARE INTERCONNECTED WITH AY 2012-13 IN TERMS OF THE ADVANCES AND PURCHASES MADE OF THE MANJAKARANAI LAND BESIDES ADVANCES MADE TO VGS ESTATES (P) LTD. FOR THE PURPO SE OF CONSTRUCTION OF STAFF QUARTERS WHEREIN THE REASONIN G OF THE AO IS ALSO CLEARLY INDICATED AND THEREFORE NOT SEPARATELY REPRODUCED IN THE INTERESTS OF BREVITY. IT IS SEEN THAT THE AO H AS IN A GENERAL AND AD HOC MANNER DISALLOWED AN AMOUNT OF 10% BY IN VOKING SEC.13(1)(C) OF THE ACT FOR CONTRAVENTION OF SEC.13 (3) ON THE COST OF LAND PURCHASED BY THE TRUST FROM THE MANAGING TR USTEE, ADVANCES MADE TO VGS ESTATES (P) LTD., FOR THE PURP OSE OF CONSTRUCTION OF STAFF QUARTERS, RENT PAID TO MS. KU SHMITHA - - ITA 2857 & 2858/16 30 GANESH AND ARTHI ASSOCIATES AND ADVANCES MADE AND R ENT PAID TO ARTHI GANESH AND SAMDURA RESORTS BESIDES RENT P AID TO VINAYAGA EDUCATIONAL TRUST WITHOUT MENTIONING IN DE TAIL WHY ALL OF THE ABOVE TRANSACTIONS HAVE BEEN WILLY NILLY EQU ATED ALMOST ON THE SAME FOOTING BY DISALLOWING UNIFORMLY 10% OF SU CH AMOUNTS ADVANCED / PAID WHICH THE AO FELT UNREASONABLE AND BENEFITTING DIRECTLY OR INDIRECTLY PERSONS SPECIFIED IN SEC.1 3 (3) OF THE ACT AND THEREFORE, RUNNING FOUL OF SEC.13(1)(C), WHICH DOES NOT APPEAR TO HAVE ANY BASIS, BUT APPEARS RATHER, TO BE QUITE ARBITRARY AND WHIMSICAL IN FACT. FURTHER, IT IS N EITHER JUSTIFIED IN A COGENT AND CREDIBLE MANNER AS TO WHY SUCH AN AD HOC DISALLOWANCE OF 10% HAD BEEN MADE IN RESPECT OF ALL THE AFORESAID TRANSACTIONS, WHEREAS THE MATERIAL FACTS RELATING TO THE PAYMENT MADE TOWARDS THE COST OF LAND AND ADVANCES MADE THERETO AND RENTS PAID ARE FOR VARIOUS PROPERTIES A T VARYING PROMINENT PLACES IN CHENNAI FOR VARYING PURPOSES WI TH VARIED URGENCY OF REQUIREMENT AND THEREFORE CERTAINLY NOT AMENDABLE TO A UNIFORM ONE-SIZE-FITS ALL AD HOC DISALLOWANCE OF 10%, AS EFFECTED BY THE AO. - - ITA 2857 & 2858/16 31 9. NOW, COMING SEPARATELY TO EACH OF THE TRANSA CTIONS MENTIONED ABOVE, FIRSTLY, REGARDING THE LAND PURCHA SED FROM ISHARI GANESH, THE TRUSTEE OF THE ASSESSEE TRUST AT 27.90 CRORES, THE CIT(APPEALS) OBSERVED THAT THE VERY FAC T AS POINTED OUT BY THE LD. AR, THAT OUT OF THE TOTAL LAND PURCH ASED OF 34 ACRES, LAND BEARING DOCUMENT NO.2754 WAS WORTH 40.80 LAKHS, WHICH WAS PURCHASED FROM UNRELATED THIRD PARTY, NOT COMING WITHIN THE PERSONS SPECIFIED U/S.13(3) OF THE ACT, SHRI D. SADHISH KUMAR, AT ALMOST THE SAME RATE AS PURCHASED FROM IS HARI GANESH, ITSELF BEARS TESTIMONY TO THE INCONTROVERTI BLE FACT THAT THE COST OF ACQUISITION PAID TO ISHARI GANESH WAS MORE OR LESS AT THE PREVAILING MARKET RATE, A FACT NEITHER CONTROVERTED NOR COMMENTED AS TO ITS UNREASONABILITY, AS AGAIN ERRON EOUSLY ALLEGED BY THE AO. 9.1 ACCORDING TO THE CIT(APPEALS), IF THE AO HAD AN Y DOUBT OR MISGIVINGS ABOUT THE RATE AT WHICH THE LAND WAS ACQ UIRED BY THE ASSESSEE TRUST, HE WOULD HAVE DONE WELL TO REFER TH E SAME TO THE VALUATION OFFICER U/S.55A OF THE ACT WITH A VIEW TO ASCERTAINING THE FAIR MARKET VALUE OF THE CAPITAL ASSET IN QUEST ION PARTICULARLY WHEN HE SUSPECTED THAT THE VALUE SO CLAIMED WAS AT VARIANCE - - ITA 2857 & 2858/16 32 WITH ITS FAIR MARKET VALUE. THE CIT(APPEALS) OBSER VED THAT THE AO HAS NEITHER BOTHERED TO FIND OUT THE GUIDELINE V ALUE OF THE SAID PROPERTY WHICH WOULD HAVE AT LEAST GIVEN HIM S OME IDEA OF THE LAND PRICE FIXED BY THE COMPETENT AUTHORITY NOR HAS HE FOUND OUT COMPARABLE SALE PRICES OF COMPARABLE PROPERTIES IN AND AROUND THE SAME LOCALITIES IN ORDER TO ARRIVE AT TH E VALUATION OF THE SAID IMPUGNED PROPERTIES AND THEREFORE THE ADOP TION OF AN AD HOC RATE CLEARLY SMACKS OF AN ARBITRARY APPROACH WH ICH IS NOT JUSTIFIED. 9.2 COMING TO THE ADVANCES MADE TO VGS ESTATE S (P) LTD., FOR THE PURPOSE OF CONSTRUCTION OF STAFF QUARTERS, THE CIT(APPEALS) OBSERVED THAT IT IS AGAIN UNCONTROVERT ED THAT THE SAME WAS PAID TO VGS ESTATES (P) LTD., FOR CONSTRUC TION OF STAFF QUARTERS JOINTLY WITH KGYES (P) LTD. FOR THE PURPOS E OF ACCOMMODATING STAFF WORKING IN THE ASSESSEES COLLE GE, WHICH THEREFORE, LEFT NO QUESTION OF INFERRING THAT THE A SSESSEE TRUST HAD DEVIATED FROM THE MAIN OBJECT OF THE TRUST, BEING P RIMARILY OF PROMOTING EDUCATIONAL ACTIVITIES BY MAKING ARRANGEM ENT FOR THE STAFF AND NON-TEACHING STAFF FOR THEIR RESIDENTIAL QUARTERS. ACCORDING TO THE CIT(APPEALS), HERE ALSO, THERE IS NO QUESTION OF - - ITA 2857 & 2858/16 33 ANY UNDUE BENEFIT EITHER DIRECTLY OR INDIRECTLY BEI NG PASSED ON TO THE ASSESSEE TRUST IN VIEW OF THE CANCELLATION OF A GREEMENT DATED 29.9.2013, WHICH CLEARLY PROVIDED FOR 5 LAKHS AS DAMAGES OR FORFEITURE CHARGES WHICH AGAIN HAS NOT BEEN DISPUTE D BY THE AO AND IF ANYTHING, CLAUSE 15/2 IN THE SALE AGREEMENT/ CANCELLATION AGREEMENT RESPECTIVELY EXTRACTED HEREUNDER : THE VENDOR (VGS ESTATE) FORFEITS HIS CLAIM OF DAMAGES/FORFEITURE CHARGES AS PER CLAUSE NO.5 OF TH E TERMS OF AGREEMENT TO SELL, AS A GESTURE OF GOODWIL L IN VIEW OF THE GESTURE BY THE VENDOR AS PER CLAUSE 2 ABOVE THE PURCHASER WILL NOT CLAIM ANY INTEREST IN FUTURE OVER THE AMOUNT TO BE REPAID BY THE VENDOR PROTECTED AND BENEFITTED THE ASSESSEE TRUST FROM DA MAGES WHICH WAS IN FACT PAID BY VGS ESTATE (P) LTD., TO THE ASS ESSEE, THEREBY COMPENSATING THE ASSESSEE AS PER CONTRACTUAL TERMS OF THE AGREEMENT, INSTEAD OF THE ASSESSEE TRUST ITSELF BEI NG BENEFITTED IN ANY MANNER, AS AGAIN ERRONEOUSLY CONTENDED BY THE A O. 9.3 THEREFORE, ACCORDING TO THE CIT(APPEALS), T HERE IS NOT MERIT IN THE AOS CONTENTION THAT SUCH ADVANCES MAD E TO VGS ESTATES (P) LTD., WAS IN CONTRAVENTION OF SEC.13(1) (C) OF THE ACT DIRECTLY OR INDIRECTLY BENEFITTING ANY PERSON REFER RED TO IN - - ITA 2857 & 2858/16 34 SEC.13(3) OF THE ACT. ACCORDINGLY, THE CIT(APPEAL S) OBSERVED THAT THE AOS DISALLOWANCE OF 10% OF AD HOC AMOUNT IN A GENERAL AND AD HOC MANNER WITHOUT ANY POINTED COGENT REASON S FOR ADOPTING SUCH AN APPROACH APPEARS TO BE WITHOUT MER IT AND REJECTED. 9.4 COMING TO THE RENT PAID TO KUSHMITHA GANE SH AND AARTHI ASSOCIATES, THE AO HAS AGAIN NOT REASONED COGENTLY AS TO WHY AND HOW THE OFFICE PREMISES OWNED BY THE DAUGHTER O F MANAGING TRUSTEE AT A PRIME LOCATION IN ANNA SALAI, NANDANAM OF 2400 S.F., AT THE RATE OF 25 PER SQ.FT. WHICH IN ANY CASE WAS BELOW THE MARKET PRICE FOR SUCH A PRIME LOCATION FOR SUCH KIN D OF PROPERTY AT ANNA SALAI PARTICULARLY IN THE BACKGROUND OF THE FA CT THAT THE PREMISES HAD TO BE RENTED SINCE IT WAS USEFUL TO CA TER TO THE PUBLIC AT LARGE TO HAVE ACCESS TO INFORMATION OF CO LLEGES AT VARIOUS LOCATIONS IN DECENT LOCALITY OF CHENNAI, WH ICH FOR A TRUST, RUNNING ENGINEERING, MEDICAL, DENTAL COLLEGES BY IT SELF, IS REQUIRED FOR ITS OWN VISIBILITY, GOODWILL AND MARKI NG COMPETITIVENESS IN THE HIGHLY COMPETITIVE EDUCATION AL FIELD IN TAMILNADU IN TODAYS TIMES. HERE TOO, THE AO WOULD HAVE DONE WELL TO FIND OUT AT LEAST THE ANNUAL VALUE OF THE P ROPERTY FROM IN - - ITA 2857 & 2858/16 35 AND AROUND THE LOCALITY WHERE THE SAID PROPERTY IS SITUATED TO ASCERTAIN HOW MUCH THE PROPERTY MIGHT BE REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR OR THE RENT RE CEIVED OR RECEIVABLE IN AN AROUND THAT LOCALITY FROM THE LAND LORDS / TENANTS / RENT CONTROLLER OF THAT AREA. IN THE ABSENCE OF AN Y SUCH EXERCISE BY THE AO, IT IS DIFFICULT TO JUSTIFY AN AD HOC ADD ITION OF 10% OF SUCH RENT, TERMED EXCESSIVE BY THE AO AND IS THEREF ORE REJECTED. 9.5 THE CIT(APPEALS) OBSERVED THAT AS TO THE R ENT PAID TO ARTHI ASSOCIATES OF 60 LAKHS WHICH WAS ON ACCOUNT OF RENT PAID TO GUEST HOUSE AT INJAMBAKKAM WITH AN AREA OF 1 ACR E (APPX 43560 SQ.FT. WITH A BUILT-UP AREA OF 13735 SQ.FT., COMPLETELY FURNISHED) AT A PRIME RESIDENTIAL LOCALITY AND BEIN G RENTED AT 5 LAKHS PER MONTH FOR SUCH A SIZABLE AREA WITH FULLY FURNISHED GUEST HOUSE AT A PRIME LOCATION COULD NOT BE CALLED AS UN REASONABLE WITHOUT THE AO CONTROVERTING THE SAME OR WITHOUT MA RSHALLING FACTS ABOUT THE RENT PREVALENT IN THE SAME / SIMILA R AREA OF COMPARABLE PROPERTIES AND COMPARABLE NEEDS / URGENC Y OF THE PROSPECTIVE / ACTUAL TENANTS. HERE TOO, SINCE THE AO HAS NOT REFERRED THE ISSUE OF THE REASONABILITY OR OTHERWIS E OF THE RENT TO ANY VALUATION OFFICER OR RENT CONTROLLER ETC., FOR THE SAME - - ITA 2857 & 2858/16 36 REASONS MENTIONED IN RELATION TO THE RENT PAID TO M S. KUSHMITHA GANESH AND AARTHI ASSOCIATION SUPRA, SUCH AD HOC AN D ARBITRARY DISALLOWANCE OF 10% OF THE SAID RENT IS REJECTED. 9.6 THE CIT(APPEALS), AGAIN FOR THE SAME REASO NS IN RESPECT OF TWO TRANSACTIONS DISCUSSED ABOVE, OBSERVED THAT THE SIMILAR AD HOC AND ARBITRARY DISALLOWANCE OF 10% ON THE REN T PAID TO MS. ARTHI GANESH OF 54 LAKHS AND ADVANCE OF 50 LAKHS AS ALSO 57.75 LAKHS AND 2 CRORES PAID TO SAMUDRA RESORTS AND VINAYAGA EDUCATIONAL TRUST AMOUNTING TO 3,53,93,400/- RESPECTIVELY FOR PREMISES TAKEN ON RENT AND USED AS A HOSTEL FOR STUDENTS AND FURTHER INFRASTRUCTURE DEVELOPMENT AT PALLAVARAM, CHENNAI, WHICH WERE ALL FOR THE EXPRESS PURPOSES OF EFFECTUATING THE OBJECTS OF THE ASSESSEE TRUST, WHICH AS STATED EARLIER, WAS ALSO IMPERATIVE TO SURVIVE IN THE HIGHLY COMPETITIV E PRIVATE PROFESSIONAL EDUCATION SCENARIO IN TAMILNADU IN TOD AYS DAY AND AGE, AND IS THEREFORE HELD TO BE LEGALLY UNTENABLE AND THEREFORE REJECTED. ACCORDING TO THE CIT(APPEALS), IN NONE O F THE ABOVE TRANSACTIONS, HAS THE AO BEEN ABLE TO MAKE OUT A CO GENT LOGICAL AND REASONABLE CASE AS TO HOW BY UNDERTAKING SUCH TRANSACTIONS, THE ASSESSEE TRUST HAD EITHER DIRECTL Y OR INDIRECTLY - - ITA 2857 & 2858/16 37 BENEFITTED PERSONS SPECIFIED IN SEC.13(3) OF THE AC T AND, THEREFORE THERE IS NO JUSTIFICATION OR RATIONALE FO R INVOKING THE PROVISIONS OF SEC.13(1)(C) OF THE ACT, THEREON. T HEREFORE, THE CIT(APPEALS) OBSERVED THAT THE AD HOC AND GENERALIZ ED DISALLOWANCE OF 10% IN RESPECT OF ALL THE TRANSACTI ONS AFORESAID IS LEGALLY UNTENABLE AND IS TO BE DELETED. ACCORDI NGLY, THE CIT(APPEALS), ALLOWED THIS GROUND OF APPEAL OF THE ASSESSEE. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 10. AT THE TIME OF HEARING, THE LD.A.R SUBMITTED TH AT THE TRIBUNAL,IN THE EARLIER ASSESSMENT YEARS 2010-11 & 2011-12 IN ASSESSEE'S OWN CASE, CONSIDERING THE ISSUE RELATIN G THE AMOUNT ADVANCED TO DR. ISHARI GANESH AND OTHER PARTIES, WH O WERE HAVING SUBSTANTIAL INTEREST IN THE ASSESSEES TRUST , AND ALSO REGARDING CORPUS DONATIONS ISSUED BY THE ASSESSEE A ND THE TRIBUNAL DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE B Y OBSERVING IN PARAS-4 TO 7 OF ITS ORDER AS FOLLOWS:- 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. SIMILAR ISSUES CAME FOR CONSIDERATION BEFO RE THIS TRIBUNAL FOR THE AY 2010-11 IN ITA NO.1759/MDS/2013 AND CO 15/MDS/20 14. THE TRIBUNAL VIDE ITS ORDER DATED 28.10.2015 HELD AS FOLLOWS : - - ITA 2857 & 2858/16 38 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE-TRUST IS REGISTERED UNDER SECTION 12AA OF THE ACT. IT IS ALSO NOT IN DISPUTE THAT THERE WAS AN AGREEMENT FOR SALE OF THE LAND BELONGING TO THE MANAGING TRUS TEE TO THE ASSESSEE-TRUST. THE ONLY OBJECTION OF THE REVENUE APPEARS TO BE THAT THE SALE OF THE LAND IS NOT ON PAR WITH THE MARKET VALUE. FROM THE ORDER OF THE ASSESSING OFFICER IT APPEARS THAT THE MARKET VALUE OF THE LAND IS VERY LESS THAN WHAT WAS AGREE TO BE SOLD TO THE ASSESSEE-TRUST. THE FACT REMAINS THAT THERE WAS AN AGREEMENT FOR SALE OF THE PROPERTY AND THE ASSESSEE -TRUST ADVANCED THE FUNDS. THERE IS NO FIXED PRICE FOR SA LE OF LAND. THE PRICE OF A LAND IS FLEXIBLE, DEPENDING UPON VAR IOUS FACTORS. THE URGENCY OF THE VENDOR TO SELL THE PROPERTY, THE NECESSITY OF THE PURCHASER TO PURCHASE THE PROPERTY, THE LOCATIO N OF THE LAND, THE AREA OF THE LAND, INFRASTRUCTURES AVAILAB LE NEARER TO THE LAND AND FUTURE PROSPERITY FOR DEVELOPMENT OF T HE LAND, ETC. NEED TO BE CONSIDERED WHILE DETERMINING THE MARKET VALUE OF A LAND. APART FROM THAT, IT IS WELL SETTLED PRINCIPL ES OF LAW THAT MARKET VALUE IS NOTHING BUT A PRICE AGREED BETWEEN THE WILLING SELLER AND WILLING PURCHASER. THEREFORE, WE CANNOT SAY THAT A PARTICULAR LAND HAS TO BE SOLD BY A PARTICULAR PERS ON FOR A PARTICULAR RATE. IF TWO WILLING PERSONS AGREED TO SELL AND PURCHASE THE PROPERTY FOR A PARTICULAR PRICE, THEN THE ASSESSING OFFICER MAY NOT HAVE ANY ROLE TO DISMISS THE AGREED PRICE UNLESS THERE ARE SOME EVIDENCES FOUND THAT THE AGRE ED PRICE DISCLOSED IS NOT ACTUALLY THE AGREED PRICE. IN THE CASE BEFORE US, IT IS NOBODYS CASE THAT THE PRICE AGREED BETWE EN THE MANAGING TRUSTEE AND THE TRUST IS NOT ACTUALLY THE AGREED PRICE. THEREFORE, THE OBSERVATION OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT THE VALUE OF THE LAND IS MUCH LESS - - ITA 2857 & 2858/16 39 THAN WHAT WAS AGREED BETWEEN THE PARTIES CANNOT STA ND IN THE EYE OF LAW. WHEN THE ASSESSEE-TRUST INTENDED TO ES TABLISH A MEDICAL COLLEGE FOR WHICH IT REQUIRES MINIMUM 25 AC RES OF LAND AND THE MANAGING TRUSTEE HAS SUCH VAST AREA OF LAND , NOTHING WRONG IN PURCHASING THE LAND FROM THE MANAGING TRUS TEE BY PAYING THE MARKET VALUE. SUBSEQUENTLY, THE ASSESSE E-TRUST COULD NOT ESTABLISH MEDICAL COLLEGE. THEREFORE, TH E AGREEMENT WAS CANCELLED. IN FACT, THE MANAGING TRUSTEE REPAI D THE PART AMOUNT ALONG WITH INTEREST. IT IS NOT THE CASE OF THE REVENUE THAT THE INTEREST PAID BY THE MANAGING TRUSTEE IS N OT IN MARKET RATE. 8. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 13 OF THE ACT. SECTION 13(1)(A) SAYS THAT IF ANY PART OF THE PROPERTY OR INCOME OF THE TRUST IS GIVEN TO THE INTERESTED PERSON WITHOUT EITHER ADEQUATE SECURITY OR ADEQUATE INTEREST, FOR THE BENEFIT OF THE PERSON INTERESTED, THEN THER E SHALL BE A DIVERSION OF FUNDS FOR THE INTERESTED PERSON. SECT ION 13(1)(C) SAYS THAT IF THE AMOUNT PAID IS EXCESS OF WHAT WAS REASONABLY PAID FOR THE SERVICE RENDERED HAS TO BE CONSIDERED AS USED OR APPLIED FOR THE BENEFIT OF PERSON INTERESTED. IN T HE CASE BEFORE US, THE MANAGING TRUSTEE HAS NOT RENDERED ANY SERVI CE. IN FACT, THERE WAS AN AGREEMENT FOR PURCHASE OF PROPER TY. THEREFORE, THE QUESTION ARISES FOR CONSIDERATION IS WHETHER THE MONEY ADVANCED BY THE ASSESSEE TO THE EXTENT OF ` 15,76,00,000/- IS WITHOUT ADEQUATE SECURITY AND AFT ER CANCELLING THE AGREEMENT, WHETHER THE ASSESSEE HAS RECEIVED THE ADEQUATE INTEREST FROM THE MANAGING TRUSTEE. W E HAVE CAREFULLY GONE THROUGH THE ORDER OF THE CIT(APPEALS ). FROM THE ORDER OF THE CIT(APPEALS) IT APPEARS THAT THE ASSES SEE HAS RECEIVED ` 4,06,92,078/- BEING THE INTEREST FROM THE MANAGING TRUSTEE, IN ADDITION TO THE PRINCIPAL AMOUNT AFTER CANCELLATION OF - - ITA 2857 & 2858/16 40 AGREEMENT. THEREFORE, THIS TRIBUNAL IS OF THE CONS IDERED OPINION THAT THE CIT(APPEALS) HAS RIGHTLY FOUND THA T AFTER CANCELLATION OF AGREEMENT, THE ASSESSEE-TRUST WAS R ETURNED AND COMPENSATED BY WAY OF INTEREST. THEREFORE, THE TRANSACTION BETWEEN THE ASSESSEE-TRUST AND THE MANA GING TRUSTEE CANNOT BE CONSTRUED AS WITHOUT ANY ADEQUATE SECURITY OR WITHOUT ANY ADEQUATE INTEREST. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MONEY WAS IN FACT A DVANCED IN PURSUANCE OF THE AGREEMENT FOR SALE. AFTER CANCELL ATION OF AGREEMENT, THE MONEY WAS RETURNED IN ITS ENTIRETY. SINCE THERE WAS DELAY IN REPAYMENT OF MONEY RECEIVED AS ADVANCE FOR SALE OF THE LAND, THE MANAGING TRUSTEE HAS ALSO PAID INT EREST TO THE EXTENT OF ` 4,06,92,078/-. THEREFORE, AT ANY STRETCH OF IMAGINATION, IT CANNOT BE SAID THAT THE MONEY WAS D IVERTED FOR INTEREST OF THE MANAGING TRUSTEE. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE IS NO VIOLATION O F SECTION 13 OF THE ACT. 9. NOW COMING TO THE RECEIPT OF DONATION FROM SRI B ALAJI CHARITABLE AND EDUCATIONAL TRUST, WHAT WAS RECEIVED BY THE ASSESSEE IS CAPITAL ASSET BY WAY OF THREE INSTITUTI ONS AND ITS INFRASTRUCTURES. IT IS NOBODYS CASE THAT THE ASSES SEES FUNDS WERE DIVERTED TO ANY OTHER TRUST. WHEN THE ASSESSE E RECEIVED THREE INSTITUTIONS FOR CARRYING OUT ITS CHARITABLE ACTIVITY, IT CANNOT BE SAID THAT THERE WAS A VIOLATION OF ANY OTHER PRO VISIONS OF INCOME-TAX ACT. IN FACT, THE ASSESSING OFFICER HIM SELF DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE MONEY WAS ADVANCED TO THE MANAGING TRUSTEE. SINCE THIS TRIBUNAL FOUND THAT THERE WAS NO VIOLATION OF SECTI ON 13(1)(C) OF THE ACT IN RESPECT OF THE AGREEMENT ENTERED BETWEEN THE ASSESSEE-TRUST AND THE MANAGING TRUSTEE FOR PURCHAS E OF PROPERTY AND IT IS NOT IN DISPUTE THAT THE MANAGING TRUSTEE RETURNED ENTIRE AMOUNT WITH INTEREST OF ` 4,06,92,078/-, THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 11 OF THE ACT. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(APPEALS) AND ACCORDINGLY, CONFIRMED. - - ITA 2857 & 2858/16 41 5. SINCE THE ISSUE RELATING TO THE MONEY ADVANCED T O MR. ISARI K. GANESH AND OTHER PARTIES WAS SUBJECT MATTER OF APPE AL BEFORE THIS TRIBUNAL FOR ASSESSMENT YEAR 2010-11 VIDE ORDER DAT ED 28.10.2015 TAKING THE CONSISTENT VIEW ON THE FACTS OF THE CASE AND BY PLACING RELIANCE ON THE JUDGEMENT OF JURISDICTIONAL HIGH CO URT IN THE CASE OF CIT VS. L. G. RAMAMURTHI IN [1977] 110 ITR 453 (MAD) WH EREIN HELD THAT TRIBUNAL IS NOT RIGHT IN TAKING ALTOGETHER DIFFEREN T VIEW IN LATER YEAR ON SAME SET OF FACTS, WHEN THERE IS NO FRESH MATERIAL BROUGHT BEFORE IT, WE ARE INCLINED TO DECIDE THE ISSUE IN FAVOUR OF ASSES SEE BY HOLDING THAT THERE IS NO VIOLATION OF PROVISIONS OF THE SECTION 13(1)(C) READ WITH SECTION 13(3) OF THE ACT AND THE ASSESSEE CANNOT B E DENIED EXEMPTION U/S.11 OF THE ACT ON THIS COUNT. 6. 1 REGARDING TREATMENT OF CONTRIBUTIONS MADE WIT H THE SPECIFIC DIRECTION TO THE ASSESSEE AS INCOME OF ASSESSEE IN TERMS OF SEC.12 OF THE ACT, THE LD.CIT(A) OBSERVED THAT ONCE THERE IS A VIOLATION OF PROVISIONS OF THE SECTION 13(3) R.W.S.13(1)(C), THE PROVISIONS OF THE SECTION 11 & 12 SHALL NOT OPERATE SO AS TO EXCLUDE THE INCOME OF THE TRUST FROM THE TOTAL INCOME OF THE PREVIOUS YEAR. ACCORDING TO SECTIONS 11 & 12 OF THE ACT, THE VOLUNTARY CONTRIBUTION MADE WITH SPECIFIC DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS O F THE TRUST OR INSTITUTION, SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PR EVIOUS YEAR OF THE TRUST. BUT ONCE, THE EXEMPTION U/S.11 AND 12 IS DENIED, TH E ASSESSEE WOULD NOT GET ANY PROTECTION FROM SEC.11 & 12 AND THE VOL UNTARY CONTRIBUTION WOULD BE TREATED AS INCOME, AS PER THE DEFINITION O F INCOME GIVEN IN SEC.2(24)(IIA) OF THE ACT, ACCORDING TO WHICH INCOM E INCLUDES THE VOLUNTARY CONTRIBUTION RECEIPTS BY A TRUST THEREBY ONCE THE EXEMPTION U/S.11 & 12 OF THE ACT IS WITHDRAWN ALL THE RECEIPT S OF THE TRUST EITHER BY VOLUNTARY CONTRIBUTION OR INCOME DERIVED FROM THE P ROPERTY WOULD BE INCOME OF THE TRUST IN A NORMAL COURSE AND IS CHARG EABLE TO TAX. ACCORDINGLY, THE LD.CIT(A) HELD THAT THE CORPUS DON ATION IS CHARGEABLE TO TAX. NOW, AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. - - ITA 2857 & 2858/16 42 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ACCORDING TO THE AUTHORISED REPRESENTATIVE THESE FUNDS ARE CONTRIBUTED TO THE TRUST FOR THE SPECIFIC PURPOSE A ND IT BEING A CAPITAL RECEIPT, IT CANNOT BE TAXED AND THIS IS NOT COLLECT ED FROM STUDENTS SO AS TO TREAT THE SAME AS INCOME OF ASSESSEE U/S.2(24)( IIA) OF THE ACT IN VIEW OF THE AMENDMENT TO THIS SECTION WITH EFFECT F ROM 01.04.1989. ACCORDING TO THE AR THESE FUNDS ARE CONTRIBUTED TO THE TRUST FOR SPECIFIC PURPOSE AND IT BEING CAPITAL RECEIPT IT CANNOT BE T AXED AND THIS IS NOT COLLECTED FROM THE STUDENTS SO AS TO TREAT THE SAME AS INCOME OF THE ASSESSEE U/S 2(24)(IIA) OF THE ACT IN VIEW OF THE A MENDMENT TO THIS SECTION W.E.F. 1.4.1989. THE ASSESSEE CONTENDED THA T THIS AMOUNT WAS COLLECTED TOWARDS CORPUS FUND WITH A SPECIFIC DIR ECTION FOR CAPITAL EXPENDITURE AND THE AMOUNT SO RECEIVED WAS SPENT FO R SPECIFIC PURPOSE FOR WHICH IT WAS COLLECTED. ACCORDING TO THE AR IT CANNOT BE TREATED AS INCOME OF THE ASSESSEE AS IT IS A SPECIFIC GRANT. A CCORDING TO THE AR THE ENTIRE RECEIPTS RECEIVED TOWARDS SPECIFIC PURPOSE C ANNOT BE TAXED. 7.1 THE ISSUE FOR OUR CONSIDERATION IS WHETHER THE AMOUNTS RECEIVED BY THE ASSESSEE WERE IN THE NATURE OF VOLUNTARY DONATI ONS RECEIVED FOR SPECIFIC PURPOSE. IF YES, WHETHER THE SAME COULD BE CONSIDERED TOWARDS CORPUS OF THE TRUST. ALTERNATIVELY, IF THE DONATION S ARE NOT VOLUNTARILY MADE, THEN WHETHER SUCH DONATIONS COULD BE CONSIDER ED AS INCOME CHARGEABLE TO TAX. THE ASSESSEE HAS TAKEN A PLEA BE FORE US THAT THESE DONATIONS ARE RECEIVED FOR A SPECIFIC PURPOSE, IT I S A TIED UP GRANT. SECTIONS 11, 12 AND 2(24)(IIA) OF THE ACT SPEAK OF VOLUNTARY CONTRIBUTIONS. THEREFORE, FIRSTLY, IT HAS TO BE SEE N WHETHER SUCH DONATIONS ARE VOLUNTARY OR NOT. ACCORDING TO THE DI CTIONARY MEANING, AN ACT CAN BE SAID TO BE VOLUNTARY IF IT IS DONE BY FR EE CHOICE OF ONCE OWN ACCORD, WITHOUT COMPULSION OR OBLIGATION, WITHOUT V ALUABLE CONSIDERATION, GRATUITOUS, ETC. THERE IS NO MATERIA L ON RECORD TO SUGGEST THAT SUCH DONATIONS ARE GIVEN AGAINST THE WILL OF T HE DONORS OR BY ANY COMPULSION OR UNDER ANY OBLIGATION. IN THAT SENSE, IT CAN BE SAID THAT THE - - ITA 2857 & 2858/16 43 DONATIONS ARE VOLUNTARY. IF THE DONATIONS ARE NOT V OLUNTARILY MADE, THE SAME FALL OUTSIDE THE AMBIT OF SECTIONS 11, 12 AND 2(24)(IIA) OF THE ACT. CONSEQUENTLY, GENERAL PROVISIONS OF INCOME-TAX ACT WOULD BECOME APPLICABLE. ACCORDING TO THE GENERAL PROVISIONS OF THE ACT, ALL RECEIPTS ARE NOT INCOME. DONATIONS RECEIVED FOR SPECIFIC OBJ ECT ARE TO BE CONSIDERED AS TIED UP FUND AND IT IS CAPITAL RECEIP T. IF THE DONATIONS ARE MADE VOLUNTARILY FOR SPECIFIC PURPOSE, THE SAME CAN NOT BE HELD AS INCOME OF THE ASSESSEE, SINCE THE DONATIONS WERE, I N OUR OPINION, GIVEN FOR SPECIFIC PURPOSE AS TIED UP GRANT AND IT CANNOT BE TAXED AS INCOME. 7.2 AS FAR AS SECTION 2(24)(IIA) IS CONCERNED, THI S SECTION HAS TO BE READ IN THE CONTEXT OF INTRODUCTION OF SECTION 12. IT IS SIGNIFICANT THAT SECTION 2(24)(IIA) WAS INSERTED WITH EFFECT FROM 1.4.1973 S IMULTANEOUSLY WITH THE PRESENT SECTION 12, BOTH OF WHICH WERE INTRODUCED F ROM THE SAID DATE BY FINANCE ACT, 1972. SECTION 12 MAKES IT CLEAR BY THE WORDS APPEARING IN PARENTHESIS THAT CONTRIBUTIONS MADE WITH A SPECIFIC DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUST OR INSTI TUTION SHALL NOT BE CONSIDERED AS INCOME OF THE TRUST. THE BOARD CIRCUL AR NO. 108 DATED 20.3.1973 IS EXTRACTED AT PAGE 1754 OF VOLUME-I OF SAMPATH IYENGAR LAW OF INCOME-TAX (10TH EDITION), IN WHICH THE INTE RRELATION BETWEEN SECTIONS 12 AND 2(24) HAS BEEN BROUGHT OUT. GIFTS M ADE WITH CLEAR DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS O F THE RELIGIOUS ENDOWMENT CAN NEVER BE CONSIDERED AS INCOME. IN THE CASE OF R.B. SHREERAM RELIGIOUS AND CHARITABLE TRUST V. CIT (172 ITR 373) (BOM) THE HONBLE HIGH COURT HELD THAT EVEN IGNORING THE AMENDMENT TO SECTION 12, WHICH MEANS THAT EVEN BEFORE THE WORDS APPEARING IN PARENTHESIS IN THE PRESENT SECTION 12, IT CANNOT BE HELD THAT VOLUNTARY CONTRIBUTIONS SPECIFICALLY RECEIVED TOWARDS CORPUS OF THE TRUST MAY BE BROUGHT TO TAX. THE AFORESAID DECISION WAS FOLLOWED BY THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. TRUSTEES OF KASTU RBAI SCINDIA COMMISSION TRUST (189 ITR 5) (BORN). IN THE PRESENT CASE DONATIONS - - ITA 2857 & 2858/16 44 BEING RECEIVED FOR SPECIFIC PURPOSE, TOWARDS CORPUS OF THE TRUST, CANNOT BE ASSESSED AS INCOME OF THE ASSESSEE. 7 .3 BEING SO, AS SEEN FROM THE ABOVE JUDGMENT, THE AMOUNT RECEIVED BY THE ASSESSEE FOR SPECIFIC PURPOSE WOULD ONLY MEA N THAT THE ASSESSEE AGREED TO ACT AS A TRUSTEE OF A SPECIAL FU ND RECEIVED BY ASSESSEE FROM VARIOUS PERSONS. AS A RESULT, IT NEED NOT BE POOLED OR INTEGRATED WITH THE ASSESSEES NORMAL INCOME. THE A SSESSEE IS ACTING AS AN INDEPENDENT TRUSTEE FOR THAT AMOUNT RECEIVED FROM VARIOUS PERSONS JUST AS SOME TRUSTEE CAN ACT AS A TRUST FOR MORE THAN ONE TRUST. TIED UP OR SPECIFIC GRANT NEED NOT, THEREFORE, BE T REATED AS AMOUNTS WHICH ARE REQUIRED TO BE CONSIDERED FOR ASSESSMENT. IN OTHER WORDS, TIED UP GRANT RECEIVED FROM DONORS FOR A SPECIFIC P URPOSE CANNOT FORM PART OF ASSESSEES INCOME. IN VIEW OF THE ABOVE DIS CUSSION, VOLUNTARY CONTRIBUTIONS IN THE NATURE OF CORPUS FUND RECEIVED BY THE ASSESSEE CANNOT BE BROUGHT TO TAX. THE TIED UP GRANT OR CORP US FUND RECEIVED BY THE ASSESSEE SHOULD NOT BE TAXABLE AS INCOME OF THE ASSESSEE, IF IT IS USED FOR SPECIFIC PURPOSE FOR WHICH IT HAS BEEN GIV EN AND IT CANNOT BE CONSIDERED AS REVENUE RECEIPTS SO AS TO TAX THE SAM E. 7.4 IN VIEW OF THE ABOVE, WE ARE INCLINED TO HOLD CORPUS DONATION RECEIVED BY THE ASSESSEE FOR THE SPECIFIC PURPOSE C ANNOT BE TREATED AS REVENUE RECEIPT AND SAME BE CONSIDERED AS CAPITAL R ECEIPT AND NOT LIABLE TO BE TAXED. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. 11.1 ACCORDING TO LD.D.R, IN THESE TWO ASSESSMENT YEARS , THERE ARE OTHER ISSUES SPECIFICALLY IN ASSESSMENT YEAR 20 12-13 WITH REGARD TO PURCHASE OF LAND MEASURING 4.49 ACRES WOR TH 4 CRORES AT ZAMIN PALLAVARAM FROM M/S.VGS(P) LTD AT A C OST OF 13.57 - - ITA 2857 & 2858/16 45 CRORES, WHICH WAS NOT AT ALL ADJUDICATED BY THE LD. CIT(A). ADMITTEDLY, ON THIS ISSUE, THE ASSESSEE WENT ON APP EAL BEFORE THE LD.CIT(A) . HOWEVER, THE LD.CIT(A) NOT GIVEN F INDINGS ON THIS ISSUE IN THE ASSESSMENT YEAR 2012-13, AS SUCH THIS ISSUE REQUIRES ADJUDICATION BY THE LD.CIT(A). ACCORDINGLY , THIS ISSUE IS REMITTED TO THE FILE OF LD.CIT(A) FOR HIS CONSIDERA TION. 11.2. THE LD.CIT(A) OBSERVED IN ASSESSMENT YEAR 20 12-13 THAT THE INTEREST HAS BEEN REMITTED AT 14% FOR THE ADVAN CE OF ` 2 CRORES PAID TO VGS ESTATES FOR THE PROPERTY AT THAL AMBUR AND THERE IS NO VIOLATION U/S.13(1)(C) OF THE ACT. IN THE ASSESSMENT YEAR 2012-13, THE CONTENTION OF THE LD.D.R IS THAT THE INTEREST WAS ONLY SHOWN PAYABLE, BUT NOT ACTUALLY RECEIVED BY TH E ASSESSEE. HENCE, IT IS REQUIRED TO BE EXAMINED AFRESH BY THE LD.CIT(A) WHETHER IT WAS ACTUALLY RECEIVED BY THE ASSESSEE IN THIS ASSESSMENT YEAR OR NOT, TO BE DECIDED AFRESH AND T HIS ISSUE IS REMITTED TO THE FILE OF LD.CIT(A) FOR HIS CONSIDERA TION. - - ITA 2857 & 2858/16 46 12. THE NEXT GROUND IN ASSESSMENT YEAR 2012-13 IS WITH REGARD TO LD.CIT(A) FINDINGS THAT THE TRUST IS ELIG IBLE FOR EXEMPTION/S.11 OF THE ACT AND THERE WAS NO VIOLATIO N/S.13(1)(C) OF THE ACT IN RESPECT OF AMOUNT PAID TO MANAGING TRUST EE FOR PURCHASE OF LAND AT MANJAKARANAI. 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THIS ISSUE WAS DECIDED IN FAVOUR OF ASSE SSEE BY THE LD.CIT(A) BY PLACING RELIANCE IN ORDER OF TRIBUNAL IN ITA NO.1759/MDS./2013 VIDE ORDER DATED 28.10.2015 FOR A SSESSMENT YEAR 2010-11. HOWEVER, IN THIS ASSESSMENT YEAR, LD.CIT(A) OBSERVED IN PAGE NOS.17 & 18 THAT THE ASSESSEE IS B ENEFITED BY SAVING INTEREST AND TRUSTEES WERE NOT BENEFITED. WE ARE NOT ABLE TO APPRECIATE THE FINDING AS THIS CALCULATION OF IN TEREST WAS NOT CONFRONTED TO AO. HENCE, WE REMIT THE ISSUE TO THE FILE OF LD.CIT(A) TO DECIDE AFRESH AFTER CONFRONTING TO AO. THIS GROUND IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 14. THE NEXT GROUND IN ASSESSMENT YEAR 2012-13 IS WITH REGARD TO LD.CIT(A) FINDINGS THAT THE ADVANCES MADE BY THE TRUST - - ITA 2857 & 2858/16 47 TO THE CONCERNS IN WHICH THE TRUSTEES ARE INTERESTE D ARE NOT ATTRACTED BY THE PROVISIONS OF THE SECTION 13(1)(D) R.W.SEC.11(5) OF THE ACT. 15. WE ARE OF THE OPINION THAT WHETHER ASSESSEE HA S SUBSEQUENTLY RECEIVED THE INTEREST OR NOT TO BE VER IFIED WITH REFERENCE TO BOOKS OF ACCOUNTS OF ASSESSEE. ACCORDI NGLY, THE CIT(A) IS DIRECTED TO DECIDE AFRESH. 16. THE NEXT GROUND IN ASSESSMENT YEAR 2012-13 I S WITH REGARD TO ADVANCING INTEREST FREE FUNDS TO THE INTE RESTED PERSONS SPECIFIED U/S.13(3) OF THE ACT AND INCURRING OF INT EREST AT ` 2.02 CRORES ON TERM LOAN AVAILED FROM ICICI BANK. IF AD VANCE ON ACCOUNT OF COMMERCIAL EXPEDIENCY, THEN ONLY THE CLA IM OF ASSESSEE TO BE ALLOWED. ACCORDINGLY, THE LD.CIT(A) HAS TO GIVE FINDINGS ON COMMERCIAL EXPEDIENCY OF ADVANCING THE MONEY TO THE INTERESTED PERSONS AND DECIDE THEREUPON. 17. THE NEXT GROUND IN ASSESSMENT YEAR 2012-13 IS WITH REGARD TO TAXING OF CORPUS DONATIONS. IF IT IS A C ORPUS DONATIONS, IT CANNOT BE TAXED AS HELD BY THE TRIBUNAL ON THE EARL IER OCCASION IN - - ITA 2857 & 2858/16 48 ITA NO.1548/MDS./2015 FOR ASSESSMENT YEAR 2011-2 DA TED 19.12.2016. HOWEVER, THE ASSESSEE HAS FURNISHED CON FIRMATION LETTER FROM THE PARTIES FIRST TIME BEFORE THE LD.CI T(A). THE SAME TO BE CONFRONTED TO LD. ASSESSING OFFICER. HENCE, T HIS ISSUE IS REMITTED BACK TO THE FILE OF LD.CIT(A) FOR THE SAME AND TO DECIDE FRESH. 20. IN THE RESULT, ITA NO.2857/MDS./2016 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. NOW, COMING TO ITA NO.2858/MDS./2016 FOR ASSESSMENT YEAR 2013-14. 21. THE FIRST GROUND IS WITH REGARD TO FINDINGS OF LD.CIT(A) THAT THERE IS NO VIOLATION U/S.13(1)(C) OF THE ACT IN RESPECT OF AMOUNT PAID TO MANAGING TRUSTEE FOR PURCHASE OF LAN D. AS DISCUSSED IN EARLIER PARA NO.13 IN ITA NO.2857/MDS ./16, THIS ISSUE IS REMITTED TO THE FILE OF LD. CIT(APPEALS) A S DISCUSSED THEREIN. 22. THE NEXT GROUND IS WITH REGARD TO FINDINGS OF LD.CIT(A) THAT THERE IS NO VIOLATION U/S.13(1)(C) OF THE ACT IN RE SPECT OF PAYMENT MADE TO M/S.VINAYAKA EDUCATIONAL TRUST. - - ITA 2857 & 2858/16 49 23. THE LD.CIT(A) HAS TO GIVE THE FINDINGS WHETHER ANY INTEREST OR SECURITY PROVIDED IN THE ABOVE TRANSAC TION AND DECIDE ACCORDINGLY. 24. THE NEXT GROUND IS WITH REGARD TO FINDINGS OF LD.CIT(A) THAT THERE IS NO VIOLATION U/S.13(1)(C) OF THE ACT IN RESPECT OF ADVANCE OF ` 2.50 CRORES GIVEN TO M/S.VGS ESTATES. 24.1 ACCORDING TO AR, THIS AMOUNT HAS BEEN GIVEN F OR CONSTRUCTION OF STAFF QUARTERS AND THE SAID AMOUNT WAS RETURNED TO THE ASSESSEE ON 24.09.2013 AND THERE IS NO CONTR A MATERIAL AGAINST THIS. IN OUR OPINION, THIS IS TO BE EXAMINE D BY LD.CIT(A) WITH REFERENCE TO THE AGREEMENT ENTERED BETWEEN THE PARTIES AND THE ASSESSEE HAS TO PROVE THE COMMERCIAL EXPEDIENCY OF THE TRANSACTIONS. ACCORDINGLY, THIS ISSUE IS REMITTED TO THE FILE OF LD. CIT(APPEALS) FOR FRESH CONSIDERATION. 25. THE NEXT GROUND IS WITH REGARD TO FINDINGS OF LD.CIT(A) THAT ADVANCES MADE BY THE TRUST TO THE CONCERNS IN WHICH THE TRUSTEES ARE INTERESTED ARE NOT ATTRACTED BY PROVIS IONS OF THE SECTION 13(1)(D) R.W.S.11(5) OF THE ACT. - - ITA 2857 & 2858/16 50 25.1 AS DISCUSSED IN EARLIER PARA IN ITA NO.2857/M DS./16, THIS ISSUE IS REMITTED TO LD.CIT(A) FOR FURTHER CONSIDER ATION. 26. THE GROUND NO.6 IN ITA NO.2858/MDS.2016 IS INFRUCTUOUS IN VIEW OF THE ORDER OF THE TRIBUNAL DA TED 16.12.2016 IN ITA NO.1548/MDS./2015, WHICH WAS DECIDED IN FAVO UR OF THE ASSESSEE. THIS GROUND NO.6 OF APPEAL IS DISMISSED. 27. IN THE RESULT, ITA NO.2858/MDS./2016 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 28. TO SUM UP, BOTH THE APPEALS FILED BY THE REVEN UE IN ITA NO.2857 & 2858/MDS./2016 ARE PARTLY ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED ON 17 TH AUGUST, 2017 AT CHENNAI. SD/- SD/- ( $ % . & '( ) ( ) * + , ) DUVVURU RL REDDY - ./012304556037- 8 9: /JUDICIAL MEMBER ! 9:;<<5=1>01>?@AB@3 )8 /CHENNAI, C9 /DATED, THE 17 TH AUGUST, 2017. K S SUNDARAM 9D EFGF / COPY TO: 1 . / APPELLANT 3. H- / CIT(A) 5. FIJ K / DR 2. / RESPONDENT 4. H / CIT 6. J(L / GF